The yuan’s status as a global currency might be gaining ground. But top CEOs see more hurdles to clear

DALIAN,
China
—
For
China’s


yuan
to
be
used
more
globally,
the
currency
needs
more
“applications”
such
as
for
stocks
and
bonds,
Bonnie
Chan,
CEO
of
Hong
Kong
Exchanges
and
Clearing
Limited,
said
on
a
panel
Tuesday.

Beijing
has
long
touted
its
ambitions
for
increasing
global
use
of
the
Chinese
yuan
—
also
known
as
the
“renminbi”
or
“RMB”
—
in
an
international
financial
market
where
the


U.S.
dollar
is
the
dominant
currency.

U.S.
sanctions
on
Russia
have
also
increased
the
pressure
on
some
countries
to
have
alternatives
to
the
greenback.

Chan,
speaking
during
the
World
Economic
Forum’s
“Summer
Davos”
meeting
in
Dalian,
China,
noted
that
people
hold
a
currency
for
trade,
or,
more
importantly,
as
a
store
of
wealth.

“We’re
not
just
going
to
hold
on
to
a
bunch
of
RMB
and
put
it
into
this
bank
account,”
she
said.
“You
want
to
have
bonds,
you
want
to
have
equities,
etc.”

“One
of
our
strategic
imperatives
[has]
been
changed
to
make
sure
that
we
continue
to
produce
more
RMB-denominated
security
products,”
Chan
said,
“so
that
investors
around
the
world
can
actually
see
more
applications
of
the
RMB
and
be
able
to
use
those
as
the
medium
to
store
wealth
in
the
form
of
the
RMB.”

Last
year,
the
HKEX
announced
a

“Dual-Counter”
program
that
allows
investors
to
trade
Hong
Kong-listed
securities
in
Hong
Kong
dollars
or
Chinese
yuan.

In
a
significant
step
toward
internationalization
of
the
yuan,
the
International
Monetary
Fund
in
2015
announced
that
it
would
add
the
yuan
to
its

basket
of
reserve
currencies
the
following
year.

The
yuan
was
the
fourth-most
active
currency
for
global
payments
by
value
in
May,
accounting
for
nearly
4.5%
of
such
transactions,
according
to
the
interbank
messaging
network
SWIFT.
The
U.S.
dollar
had
a
nearly
48%
share.

In
trade
finance,
the
yuan
ranked
third
at
about
5.1%
in
May,
according
to
SWIFT.
The


euro
was
slightly
higher
at
5.6%,
while
the
U.S.
dollar
dominated
with
a
nearly
85%
share,
the
data
showed.

Fred
Hu,
founder,
chairman
and
CEO
of
Primavera
Capital,
said
on
the
same
panel
Tuesday
that
the
internationalization
of
the
yuan
is
probably
going
to
take
longer
than
many
expect,
despite
an
increased
amount
of
statements
from
Beijing.

While
China
is
the
largest
trading
nation
and
has
large
financial
centers,
“we’re
not
as
big,
as
deep
as
the
U.S.,”
Hu
said.
“Besides
our
capital
account
is
also
closed,
it’s
not
fully
convertible,
[which]
also
in
some
way
[is]
hampering
the
internationalization
of
the
renminbi.”

Developing
more
Chinese
yuan-denominated
investment
products
also
requires
a
maturation
of
the
local
financial
sector.
Part
of
that
includes
having
a
more
sophisticated
investor
base.

Chan
said
that
during
the
annual
Lujiazui
Financial
Forum
in
Shanghai
last
week,
nearly
every
conversation
with
top
leaders
included
the
term
“patient
investing.”

The
phrase
has
emerged
in
official
releases
to
encourage
long-term
investing
over
short-term
speculation.

“Patience
comes
from
learning
through
the
market
volatility,”
Kenny
Lam,
CEO
of
Two
Sigma
Asia-Pacific,
said
during
the
same
panel
on
Tuesday.

He
said
that
policymakers
have
been
giving
more
thought
to
making
their
policies
more
stable
and
consistent.

Chinese
companies
have
long
sought
to
tap
U.S.
financial
markets
for
the
prestige
and
greater
market
liquidity
they
offer,
but
increased
regulatory
scrutiny
by
both
Beijing
and
Washington,
D.C.,
has
drastically
slowed
such
listings
in
the
last
three
years.

“I
think
IPOs
are
essential
for
attracting
investors
to
come
back
in
the
market.
All
of
the
storytelling
around
it,
it
shows
that
there’s
a
lot
of
progress
happening,”
Jonathan
Krane,
the
founder
and
CEO
of KraneShares,
also
said
on
the
panel
on
Tuesday.

“In
the
U.S.
we
see
all
this
innovation,
AI
and
all
these
companies
going
public
and
doing
well,
and
then
in
China,
the
same
industry,
same
innovations
happen
and
those
stories
should
be
told
through
the
IPO
market,”
Krane
said,
noting
he
is
hearing
that
the
IPO
market
“is
going
to
start
coming
back.”

Chinese
authorities
last
week
announced
a
new
effort
to

support
initial
public
offerings,
especially
in
Hong
Kong.

Chan
said
so
far
this
year
the
Hong
Kong
exchange
has
received
73
new
listing
applications
—
a
50%
increase
versus
the
second
half
of
last
year,
she
said.
“The
pipeline
is
building
up
nicely,”
she
said,
noting
about
110
IPOs
in
total
are
in
line.
“All
we
need
is
a
set
of
good
market
conditions
so
these
things
get
to
launch
and
price
nicely,”
she
added.