Although capital controls ensure that worldwide use of China’s currency, the Renminbi, has lagged far behind the nation’s influence on world markets, China’s currency is seeing greatly increased use in cross-border trade as a vehicle currency. This trend accelerated in the aftermath of the global financial crisis amidst successive agreements with neighbouring countries such as Japan and Russia to move away from the dollar in favour of using their own currencies for bilateral trade. Other key steps include the establishment of a full offshore Renminbi market in Hong Kong in 2010 and the September 2013 establishment of the Shanghai free-trade zone. Meanwhile, offshore Renminbi bond issuance not only reached a cumulative total of nearly RMB 400 billion in Hong Kong by the third quarter of 2013 but also was being joined by such new offshore Renminbi bond centres as Singapore, Taiwan and London. It is no longer so farfetched to imagine the greenback being replaced by a new ‘redback’ standard in the long run.
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