cost of external financing. so china ’ s ambition is readily understandable. china is clearly making progress towards achieving this ambition. given this, tonight i would like to talk first about that progress and then about some of the challenges and opportunities that lie ahead. progress when we speak of an internationalised currency, what we typically have in mind is a currency that is used frequently in international trade and investment transactions between residents and non - residents and also in transactions that involve only non - residents. an internationalised currency can ’ t be achieved overnight. it takes time. it takes time for nonresidents to be comfortable using another currency. they need to have the hedging instruments available to manage risk effectively and a degree of familiarity with the foreign currency. it also takes time for the home authorities to be comfortable allowing their currency to be freely bought and sold by non - residents. so internationalisation is not something that occurs quickly. for the rmb there has been more progress in the use of the currency in transactions between 1 / 5 bis central bankers'speeches residents and non - residents than there has been in its use for transactions between nonresidents only. this is particularly so on the trade side, as the chinese authorities have been encouraging the use of the rmb for trade invoicing and settlement for quite some time. the use of the rmb for trade transactions has been facilitated by the establishment of offshore rmb centres, which provide a link between offshore markets and the mainland. as you are aware, these centres are a unique feature of the rmb internationalisation process and are an obvious impetus for this dialogue. 1 importantly, market participants should have the confidence to use the rmb freely within these centres, as many of these centres have rmb swap facilities with the people ’ s bank of china ( pbc ). as such, they play a role in facilitating rmb transactions between non - residents. that said, there has recently been a decline in some measures of offshore rmb activity, which i will touch on in a moment. consistent with the experience of other currencies, the increased use of the rmb in trade transactions has led to an increase in rmb - denominated financial transactions between mainland residents and non - residents. 2 most foreign financial institutions now have access to china ’ s bond markets, including, since last year, in the way previously available only to central banks and sovereign wealth funds. nevertheless, domestic bonds purchased by foreign investors only account for

around 1 – 1½ per cent of the market, although the market itself has expanded quickly. the authorities also intend to create a link between the bond markets in mainland china and hong kong later this year. in addition, as of earlier this year foreign investors are permitted to participate in the domestic foreign exchange derivative market to hedge the currency risk they take on as part of their bond investments. foreign investors also have access to china ’ s equity markets through programs such as the shanghai and shenzhen stock connect schemes with hong kong. the stock connect schemes have facilitated capital outflows from china, alongside other schemes allowing institutional investors to invest offshore. reflecting the progress that has been made, last year the rmb entered the basket of currencies that determine the value of the imf ’ s special drawing right. this followed the imf ’ s decision in late 2015 to designate the rmb as ‘ freely usable ’. not surprisingly, an increasing number of countries, including australia, invest a portion of their foreign reserves in rmb. i note, however, that according to the imf ’ s latest figures, the total value of foreign reserves invested in australian dollars is still significantly higher than invested in rmb. i expect this to change over time. our local rmb market has also been developing, albeit from a low base. recently published survey data collected by the rba show that the value of rmb deposits held with australianresident banks rose strongly over 2015 and has been broadly unchanged over the past year, at around rmb30 – 40 billion. 3 consistent with this, annual data from the australian bureau of statistics show that the share of australia ’ s trade with china invoiced in rmb has continued to rise in recent years. in contrast to the experience here in australia, the share of china ’ s total trade settled in rmb has declined over recent times. after peaking at almost 30 per cent in mid 2015, that share is currently around 15 per cent. the decline in the share of rmb payments for imports has contributed to a decline in the stock of rmb deposits in the offshore centres given that supply of rmb to these centres is largely through rmb trade payments. as dr ma touched on earlier today, part of this rise and subsequent fall in offshore rmb deposits reflects changed expectations about the future path of the rmb. but there has also been some underlying growth in demand for offshore rmb deposits for transactional purposes, with investors actively seeking to manage