Earlier, Pakistan’s purchase of Russian oil in Chinese yuan was a major development in China’s commitment to globalize its currency.
TRADING BEGINS IN YUAN ON HONG KONG STOCK MARKER
China Globalizes Its Currency: About two dozen Chinese companies will begin trading in yuan on the Hong Kong stock market.
China will enter the next phase of globalizing its currency when about two dozen Chinese companies begin trading in yuan on the Hong Kong stock market on Monday.
Earlier, Pakistan’s purchase of Russian oil in Chinese yuan was a major development in China’s commitment to globalize its currency.
In Hong Kong stocks, companies such as Alibaba and Tencent are among 24 stocks that will trade on both the yuan and the Hong Kong dollar under a dual-counter model on the Hong Kong Stock Exchange from Monday.
The scheme is initially being rolled out to overseas investors with Yuan Holdings but will later include mainland Chinese investors through the Hong Kong China Stock Connect link-up.
Offshore Chinese currency reserves in Hong Kong alone are estimated at about 833 billion yuan (US$117 billion).
Fund managers say the move reflects Beijing’s desire to expand the use of the yuan internationally outside of China and provide another avenue for yuan-based investments and foreign currencies such as the U.S. dollar. Reduces the risk of reservoir migration.
Ding Wenjie, global capital investment specialist at China Asset Management Company, told Reuters: ‘China is pushing to make the yuan an international currency to avoid geopolitical risks and reduce dependence on the dollar. For this purpose you need to use the Chinese currency on a large scale.’
Ding said the scheme is an important milestone and the model is expected to be expanded in the future, promoting the yuan in bonds and overseas assets after stock markets.
This first step of globalization came during the agreements to use the yuan in bilateral deals when China decided to transact with its trading partners in its local currency. These agreements range from buying oil from the Middle East to trading in yuan in commodities with partners from Brazil to Russia.
The US dollar is still the dominant global currency and 42% of global trade is settled in US dollars.
The yuan’s share of global payments is just 2.29 percent, but that’s up 1.95 percent from two years ago.
