Integrating the Great Wall with Global Capital Markets

Celent has released a new report titled RMB Internationalization: Integrating the Great Wall with Global Capital Markets. The report was commissioned by the Depository Trust & Clearing Corporation (DTCC) and was written by Arin Ray, an Analyst with Celent’s Securities & Investments practice.

China has made significant progress in its bid to internationalize its currency, the Renminbi. Several policy and market structure changes implemented by Chinese and other national regulators, as well as by some leading infrastructure providers, are shaping the RMB Internationalization journey.

RMB Internationalization offers numerous benefits to players in capital markets. Investment managers and hedge funds can gain easier and wider access to Chinese assets with high return and better risk management features.

The RMB Internationalization process also has some challenges; for example, rules and practices on issues relating to trading and settlement in China differ significantly from international standards. These issues create operational challenges at a firm level which result in inefficiencies for capital market firms, and hinder faster adoption of the RMB among international participants.

“Developing capabilities to overcome local nuances will likely be operationally difficult and expensive for individual firms,” says Ray. “There is a clear need for more coordinated efforts among market participants at an industry level, and active engagement and coordination with regulatory authorities to resolve them.”