“The current role of the offshore renminbi market as a conduit of funds from the rest of the world to the mainland may not be its last role. Over time, the renminbi offshore market is likely to play above all the role of intermediary between non-mainland borrowers and lenders,” the BIS said in a special feature in its June quarterly review.
BIS examined the 38-year history of the eurodollar market for clues to the future of the offshore renminbi market, with the study raising doubts over claims that international use of the renminbi requires China to run a current account deficit. It also suggests that one-way speculative positioning, taken by some critics as the main impetus for international use of the renminbi, will prove to be temporary.
China is taking steps to internationalise the role of the renminbi, with London and Singapore attempting to compete with Hong Kong as the main offshore center for renminbi trading.
Read more at the BIS: www.bis.org/publ/qtrpdf/r_qt1206.htm