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02Dec15

Backgrounder: Chronology of RMB going global

China's yuan, or the RMB, was admitted by the International Monetary Fund (IMF) into its benchmark currency basket Monday, the latest step for its journey to internationalization.

The RMB's inclusion into the Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen, came after a flurry of reforms. The following is a chronology of major reforms over the past decade.

  • July 21, 2005: China initiated the reforms by depegging the yuan from the U.S. dollar.

  • July 22, 2005: The People's Bank of China (PBOC), the central bank, began announcing the yuan's closing rate against major currencies on the inter-bank foreign exchange market each trading day.

  • May 21, 2007: The yuan's value was allowed to rise or fall by 0.5 percent from the central parity rate each trading day, from a previous limit of 0.3 percent.

  • July 9, 2007: China Development Bank announced it had successfully issued its first dim sum bond — an offshore yuan denominated bond.

  • April 8, 2009: Cross-border trade was allowed to be settled in the Chinese currency on a trial basis in Shanghai and Guangdong Province.

  • July 21, 2009: Four years since the exchange rate reform, the yuan against the U.S. dollar had appreciated by 21 percent.

  • July 2, 2009: The PBOC launched a yuan trade settlement pilot project, unveiling detailed measures on how to make transactions using the yuan to settle trade with Hong Kong, Macau and regional trade partners.

  • March 24, 2010: A multilateral currency swap agreement — the Chiang Mai Initiative Multilateralization agreement — between China, Japan, the Republic of Korea and the 10-member Association of Southeast Asian Nations came into effect, drawing on a pool of 120 billion U.S. dollars.

  • Nov. 22, 2010: China started direct trading between the yuan and the Russian ruble on the inter-bank foreign exchange market.

  • Dec. 15, 2010: The yuan started trading in Russia, the first overseas market for the Chinese currency.

  • Jan. 13, 2011: The PBOC allowed qualified domestic enterprises to invest in foreign countries directly using the yuan.

  • Dec. 16, 2011: China launched pilot programs of RMB Qualified Foreign Institutional Investors.

  • April 16, 2012: The yuan's value was allowed to rise or fall by one percent from the central parity rate each trading day, from the previous limit of 0.5 percent.

  • May 14, 2012: The Chiang Mai Initiative pool doubled to 240 billion U.S. dollars.

  • June 1, 2012: China started direct trading between the yuan and the Japanese yen on the inter-bank foreign exchange market.

  • April 9, 2013: China started direct trading between the yuan and the Australian dollar on the inter-bank foreign exchange market.

  • June 22, 2013: Bank of England became the 20th central bank to sign a currency swap with the PBOC.

  • Sept. 29, 2013: Shanghai Free Trade Zone was established as a test ground for financial reforms, with easier rules on FX transactions.

  • March 17, 2014: The yuan's value was allowed to rise or fall by 2 percent from the central parity rate each trading day, from the previous limit of 1 percent.

  • June 18, 2014: China started direct trading between the yuan and the British pound on the inter-bank foreign exchange market.

  • Sept. 30, 2014: China started direct trading between the yuan and the euro on the inter-bank foreign exchange market.

  • Nov. 17, 2014: China launched Shanghai-Hong Kong stock trading link program.

  • May 26, 2015: David Lipton, first deputy managing director of the IMF, said the yuan was no longer undervalued while in Beijing.

  • July 14, 2015: The central bank granted access for foreign central banks, sovereign wealth funds and international financial institutions to the domestic interbank bond market and further opened the onshore interbank foreign exchange market to such institutions on Sept. 30.

  • Aug. 11, 2015: The PBOC reformed the country's exchange rate formation mechanism to allow the central parity rate of the yuan to better reflect the market rate.

  • Oct. 8, 2015: The first phase of the Cross-border Interbank Payment System, which provides capital settlement and clearing services for cross-border yuan transactions for financial institutions, was launched in Shanghai, promoting the global use of the Chinese currency.

  • Oct. 20, 2015: The PBOC extended an agreement on a reciprocal currency swap scheme with the Bank of England to promote London as an offshore RMB center and issued its first offshore RMB note in London.

  • Oct. 24, 2015: The central bank scrapped the ceiling limits on all deposit interest rates, marking the completion of rate liberalization.

  • Nov. 3, 2015: A proposal on formulating the Thirteenth Five-year Plan (2016-2020) said China will gradually make the yuan convertible on the capital account.

  • Nov. 30, 2015: The IMF admitted China's yuan into the SDR basket.

  • Dec. 1, 2015: The PBOC vowed to speed financial reforms.
[Source: Xinhua, Beijing, 02Dec15]
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