The Rise of the Redback, A guide to renminbi internationalisation, Qu Hongbon, Sun Junwei and Donna Kwok, HSBC

Sometimes, it is quite fascinating to read banking papers. For the HSBCspecialists based in Hong Kong, there is very little doubt about the future of the Chinese renminbi. Already the world’s biggest exporter and the second largest economy, China is likely to be the biggest by 2030. The bankers’ key point is about the under-representation of the renminbi in the global trade and capital markets. “We may be on the verge of a financial revolution of truly epic proportions”. 

Demand for the renminbi as a trade settlement currency lies in emerging, not developed, economies, which already account for 55% of China’s total trade. Such a move is no guess, it is a strategy set out by the Authorities of China. They have good reasons to believe that the pressure on the US dollar is unbearable for the US itself, who are themselves turning to the Chinese government to help them rebalance trade and currencies flow. The way China looks at it now comes with a different answer: China will not play with the exchange rate which would stimulate their own inflation, a bad idea as they try to stimulate the internal demand and consumption. They would rather change the global policy of reserves currencies. The dollar cannot be at the time the reserve and withdraw the US market turmoil. With this review of two years of their own publications, HSBC comes to a clear reading of the inevitable course of the Chinese currency. And looking at the size and growth of the Chinese economy, what can an honest banker –don’t smile here– based in Hong Kong say about that? He sees a revolution in the making. For once, people should listen to him.