the following considerations should be kept in mind : first, the significant bilateral commercial relations between euro area and china should support a steady increase in eur / cny trade volumes. this is because european counterparties are interested in settling their trade invoices in renminbi to benefit from price discounts and to access different suppliers. chinese counterparties are also increasingly keen to settle in renminbi to reduce their exchange rate risk and to simplify their cash management. bis central bankers ’ speeches second, although they have not committed to a strict timetable, the chinese authorities have shown their commitment towards a more flexible exchange rate and increasing the convertibility of the renminbi. in 2012, china widened the currency ’ s floating band. in addition, over the last few years, the scope for cross - border investment flows has been enlarged through the setting - up of a number of investment schemes open to institutional investors. we are still in the early stages of this internationalisation, but it ’ s a process that is rapidly moving forward. market participants expect trade settlements in renminbi to continue to increase and new offshore markets to emerge, offering a broad range of products to attract foreign investors. they also foresee a progressive liberalisation of the capital account, including an increasing number of institutional investors operating in mainland china and, ultimately, a fully convertible renminbi. clearly, having become an important trading and payment currency, the renminbi is now taking the first steps towards establishing itself as an international investment currency. if it can do so successfully, it might one day become a leading reserve currency. its internationalisation raises questions about the future shape of the world ’ s monetary system. in particular, due to the size of china ’ s economy and its importance in global trade and, potentially, finance, the renminbi might ultimately come to challenge the us dollar. although it is too early to say what the implications for international financial stability could be, the authorities and investors need to prepare for a world in which the renminbi will play a much more important role. thank you for your attention. bis central bankers ’ speeches

that it will play a role in the internationalisation of china ’ s currency. the euro area is also home to global companies with extensive operations in china and an evident interest in conducting operations in renminbi. the currency ’ s trade settlement scheme is the main link between both markets, on and offshore. this scheme was initially developed to foster the development in offshore markets, offering several benefits to foreign trading partners : ( i ) the possibility of negotiating better trade terms when invoices are denominated in renminbi rather than the us dollar ; ( ii ) a natural hedge as both trade partners issue invoices in the same currency ; ( iii ) access to small and medium - sized chinese firms that are unable to contract in foreign currency and ( iv ) the scheme offers the possibility of benefiting from capital gains, as the renminbi is expected to appreciate in the years ahead. the main prerequisite for engaging in trade settlement is to involve a bank that can settle transactions in the interbank market in mainland china and convert currency in the onshore foreign exchange market. typically, there are two channels through which renminbi trade settlement is possible : ( i ) via a mainland correspondent bank, where the offshore bank of a foreign trade partner settles trade invoices with chinese firms via an account with that correspondent bank, with the renminbi proceeds subject to chinese regulations ; ii ) via clearing banks licensed by the pboc to operate offshore ( bochk for hong kong ), where the offshore bank settles trade invoices via an account with that clearing bank, buying or selling renminbi in the offshore market ( at the cnh rate ). since the expansion of the scheme, renminbi trade settlement has increased sharply, accounting for around 15 % of china ’ s total foreign trade in the third quarter of 2013, with prospects for further growth as more offshore centres open across the world. conclusion in conclusion, the internationalisation of the renminbi offers many opportunities, both for chinese and international investors and corporates, including in the euro area. nonetheless, to fully reap the benefits of this process, china needs to continue reforming its economy, in particular its financial sector, along a clear, well - sequenced path to minimise risks and enhance confidence. equally, chinese and international investors and financial institutions must make a realistic assessment of the risks involved in cross - border investment, and build up commensurate buffers. in view of these risks,