Writing ideas: First write about the development path of RMB, then write down the fact that RMB is restricted internationally, and finally write down the method for RMB to go international.

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Over the past 40 years of China’s reform and opening up, the exchange rate determination mechanism has undergone tremendous changes. Initially, the RMB was a non-convertible currency, and its exchange rate was determined by the People's Bank of China, the central bank, only as a policy tool to regulate import and export trade and improve the balance of international payments.

For example, in 1979, when the People's Bank of China set the exchange rate at 1 US dollar: 1.55 yuan, a black market spontaneously emerged despite severe government crackdowns. Exporters who earn foreign currency receive substantial subsidies at exchange counters designated by the Bank of China. Since 1981, the exchange rate has been declining until it hit a bottom of 1:8.61 in 1994. The end of the dual-track system paved the way for the announcement of free convertibility under the current account two years later.

When the managed floating exchange rate system was adopted, the black market disappeared and the Foreign Exchange Certificates (FECs) as a currency control tool were phased out. The exchange rate remained stable at a level close to 1:8.30 for 10 years until 2005, when it completely removed its peg to the US dollar and linked its value to the 5 major global currencies (GBP, Japanese yen, US dollar, Euro and Hong Kong dollar) hook up. This put the RMB on an appreciation track, successfully withstood the Asian financial crisis at the turn of the century, and remains resilient to this day.

Since the introduction of foreign exchange transactions into the inter-bank foreign exchange market in 2005, the complexity of the People’s Bank of China’s management of foreign exchange dynamics has continued to increase. The aim is to maintain the stability of its currency while cautiously expanding the volatility channel in response to fluctuations in global financial markets. In addition to bilateral and spot transactions in major currencies as a means of open market operations, a number of financial instruments are also used, including credit loans, bond transactions, forward foreign exchange transactions and commercial paper quotations.

In 2015, the People's Bank of China (PBOC) adopted the China Foreign Exchange Trading System (CFETS) RMB Index to weight the RMB of 13 currencies currently listed and being directly traded, further opening up the gap between the RMB and the US dollar. distance. That means the yuan's performance in either direction doesn't have to closely track the dollar's wobbly U.S. monetary policy.

In 2016, the International Monetary Fund (IMF) included the RMB as the fifth currency in the Special Drawing Rights Basket (SDR), although it will take time to gain wider utility in the international business community, which is considered It is a milestone in the process of RMB globalization.

This is seen as another structural adjustment of global financial institutions following the birth of the euro since the collapse of the Bretton Woods system in the early 1970s, and may have symbolic significance in the short term. At the same time, this also injects a stronger sense of responsibility into the Chinese Monetary Authority to improve the transparency and accountability of its policy making.

During the financial crisis, China earned respect by avoiding currency devaluations similar to those of its neighbors. With the enhancement of economic strength and the realization of currency credibility, China has successfully signed a series of bilateral swap agreements exceeding 3 trillion yuan with more than 30 partner countries. This is a joint effort to build a shield against the looming financial crisis since 2008.

The BRICS New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB), headquartered in Shanghai and Beijing, are new multilateral financial institutions in which China believes that it can play an important role in facility development and sustainable growth.

While the NDB is still limited to the BRICS framework, the AIIB has now grown to 102 approved members globally. Since it became operational in 2016, dozens of large-scale projects are underway.

They not only make up for the shortcomings of multilateral financial institutions such as the World Bank and the Asian Development Bank (ADB), but also make innovative contributions to the United Nations Sustainable Development Goals (SDGS), which is fully in line with China's " The mission of the Belt and Road Initiative.

Relevant measures promulgated by the State Council in 2019 to further open up the financial industry have caused a sensation in the global financial community due to the temptation of China's 3 trillion yuan in financial assets in the hands of banks, securities, insurance companies and fund managers. . This is a decisive move, arguably similar to China's entry into the World Trade Organization (WTO) in 2001. These 11 measures overhaul the restrictions on entry and equity participation of foreign financial institutions, stipulating specific terms and timetables.

In early 2019, S&P Global received approval to become the first foreign credit rating agency to set up a local branch in China. Shortly afterwards, Fitch Ratings, which is responsible for rating fixed income securities in China’s interbank market, also followed suit. Approved. The influx of foreign financial institutions is expected to bring China closer to a level playing field in globalization.

In short, the most obvious path China’s RMB has taken is: liberalization and globalization.

Although caution from time to time may be criticized as a protective policy, especially considering the long-awaited opening of China's capital account for overseas funds, it is a responsible path: the door to RMB internationalization will not be closed, but will only open up in a more Embrace global capital with an open attitude!