Glenn Stevens: Remarks at the launch of the Official Australian
Renminbi Clearing Bank
Remarks by Mr Glenn Stevens, Governor of the Reserve Bank of Australia, at the launch of
the Official Australian Renminbi Clearing Bank. Sydney, 9 February 2015.
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Premier, Consul General, Mr Chen, distinguished guests, colleagues, ladies and gentlemen,
thank you for the invitation to say a few words on the occasion of the launch of the Bank of
China (Sydney) as the official renminbi clearing bank here in Australia.
Today's events mark an important step in the further development of a local renminbi - or
RMB - market. But more than that, they mark one more step in a lengthy and very important
journey that has seen the flowering of trade relations between China and Australia, and
which promises benefits from the maturing of financial ties.
On its own, the key direct benefit of the official Australian RMB clearing bank is that it can
more efficiently facilitate transactions between Australian firms and their mainland Chinese
counterparts using the Chinese currency. Bank of China (Sydney)'s "official" status - which
was granted by the People's Bank of China (PBC) - affords it more direct access to the
Chinese financial system, with flow-on effects for local financial institutions and their
customers.
But an official Australian RMB clearing bank also confers some indirect benefits on the
Australian financial sector and its customers, particularly when viewed as one element of a
broader range of initiatives.
In particular, the establishment of the clearing bank helps to raise awareness among
Australian firms that the local financial system has the capacity to effect cross-border RMB
transactions on their behalf. This is important, because over the long run, Chinese firms may
increasingly wish their trade with Australian firms to be settled in RMB. To be sure, today the
bulk of global trade is settled in US dollars. But with China now a very large trading nation,
and continuing to grow into a "continental sized" economy, it would be surprising if at some
point we do not see much more use of China's currency for trade purposes. Already its
usage is growing quickly, if only from a small base. So Australian firms and the Australian
financial system need to be well prepared.
To that end, the RBA has been directly involved in several initiatives, with the aim in each
instance being to ensure that there are mechanisms in place that allow the private sector to
increase its use of the Chinese currency as and when it chooses to do so. This of course
included the signing of a Memorandum of Understanding with the PBC to enable the
establishment of an official RMB clearing bank in Australia, in November last year following
the G20 Leaders' Summit in Brisbane.
In addition, there was the establishment of a bilateral local currency swap line with the PBC
in 2012, which is designed to provide confidence to both Chinese and Australian financial
institutions that appropriate RMB and AUD liquidity arrangements are in place in the event of
dislocation in the market.
More recently, there was the negotiation of a quota to allow financial institutions based in
Australia to invest in approved mainland Chinese securities under the Renminbi Qualified
Foreign Institutional Investor Scheme - better known as RQFII.
Finally, I note the RBA has invested a small proportion of Australia's foreign currency
reserves in RMB.
Official initiatives like these help to lay the groundwork. But ultimately, the development of an
RMB market in Australia will depend on the extent of benefit the private sector sees in using
RMB for trade settlement and investment purposes. It is worth noting that private sector-led
initiatives are now becoming increasingly important drivers of the RMB market's
development. For example, forums such as the Australia-Hong Kong RMB Trade and
Investment Dialogue and the "Sydney for RMB" Working Group are beginning to have a
more prominent role in raising awareness of the financial sector's capacity to conduct RMB
business and in identifying any further market development issues that may need to be
addressed.
Looking ahead, and as my colleague, Deputy Governor Philip Lowe has noted a number of
times, the process of RMB internationalisation and the associated opening of China's capital
account are likely to have significant implications for the global financial system - much like
the opening up of China's current account has had a very large impact on the global
economy.1 The Chinese authorities have indicated that they intend to continue RMB
internationalisation and capital account liberalisation in the coming years. As a result, the
opportunities for Australian and Chinese investors to invest in each other's financial markets
could grow significantly in the coming years. By increasing their familiarity with the RMB as
an international transaction currency, local financial institutions, investors and firms are likely
to be better placed to take advantage of these future opportunities as they arise.
I congratulate the Bank of China (Sydney) on the official launch of RMB clearing facilities in
Sydney. This is a further important step in what continues to be a fascinating journey.