a significantly greater proportion of china ’ s exports were paid for in rmb, then its imports. similarly, while 63 % of the fdi into china was in rmb, only 16 % of the direct investment out of china was in rmb. what all these lead us to is that a currency cannot be a true global currency on the basis of current account convertibility alone. it needs to be convertible also on the capital account. however, a significant opening of the capital account is the deep water in china ’ s quest to globalise the rmb. it is like the rmb sailing out of the calm waters of the harbour into the choppy waters of the wide open seas. having the support of the five fundamental factors i have discussed will ensure that the rmb is better prepared to navigate those choppy waters. to ensure sustainable rmb internationalisation would require patience, persistence and careful thought – both on the part of chinese policymakers as well as those outside china. how an internationalised rmb could change the global landscape let me now move on to briefly delve on the implications of a global rmb on the global monetary landscape. in today ’ s global monetary system, nobody can deny that there is a lack of choice when it comes to global currencies. this situation is rather precarious. we saw during the financial crisis in the advanced economies how financial markets globally seized up and the global bis central bankers ’ speeches monetary system came to the brink of collapse. a more multipolar monetary system should engender greater global financial stability. if global liquidity was represented by more currencies, then the likelihood of any one currency being a determinant of global liquidity would be significantly reduced. the observation of large surpluses of a currency, and that currency nevertheless appreciating, is an anomaly created by a global system where there are too few global currencies. by there not being enough choice, the whole world bears the pain when the domestic policies of the few major currency economies become extreme and inconsistent with the global role of their currencies. monetary policy in many major advanced economies is being conducted as if theirs are closed economies with closed financial systems. the implication in terms of how monetary policy is conducted is that it creates a false sense of confidence about the effectiveness of extreme monetary policy with respect to the domestic economy and a failure to fully appreciate the global implications. in an integrated global economy and financial systems, the impact of policies leak out

as a result, the ccyb makes the financial system more resilient to macroeconomic risks and thus helps to keep lending stable. this narrative is easy to communicate as long as the build - up of cyclical risks goes hand in hand with a booming economy. if the economy cools down, communication has to be more specific. building up the ccyb is appropriate as long as cyclical risks are rising and the increase of the buffer is unlikely to trigger procyclical effects itself. if the cyclical systemic risks ease off, the buffer can be reduced again. the second – and related – aspect is the way the ccyb can mitigate deleveraging and help stabilize credit supply in bad times. this important feature of the ccyb is rooted in the fact that macroprudential buffers perform a function that is fundamentally different to that of microprudential minimum capital requirements : minimum capital requirements must be met at all times. weaker capitalization directly results in measures ranging from supervisory action to the withdrawal of a banking licence. by contrast, macroprudential buffers can provided some “ breathing ” space. unlike microprudential minimum capital requirements, banks can therefore use macroprudential buffers to absorb losses on a going - concern basis. the possibility of absorbing losses in this way provides banks with immediate financial leeway, thereby mitigating negative effects stemming from the banking system in a cyclical downturn. [ 12 ] an additional feature of the ccyb is that – in contrast to other macroprudential buffers – it can be immediately lowered by the macroprudential authority in periods of stress in order to absorb losses. overall, it took about two years to prepare the buffer decision. in 2017 and 2018, the bundesbank in its financial stability reviews intensified communication on the build - up of cyclical risks in the german financial system. in 2018 and 2019, the german financial stability committee discussed available instruments to address cyclical risks. in december 2018, it held a press briefing on cyclical risks in the financial system. in may 2019, the committee recommended to the macroprudential authority, i. e. bafin, to activate the buffer, which bafin did in july 2019. the buffer was increased to a level of 0. 25 % with a phase - in period of one year. the buffer also applies in a reciprocal manner to members of the european economic area. germany thus followed the lead of