Renminbi has ‘huge’ room to grow as more Chinese firms expand overseas: StanChart

[SINGAPORE] The renminbi is poised to capture a significantly larger share of global trade and finance as more Chinese companies expand overseas and as China pushes to internationalise its currency, said Standard Chartered executives.

But the Chinese currency is unlikely to challenge the US dollar’s dominant position in the foreseeable future, given the constraints including limited liquidity in offshore renminbi markets, they noted.

While the push to internationalise the renminbi is sometimes viewed as a “political agenda”, the currency’s adoption will ultimately be driven by commercial factors such as greater liquidity, improved infrastructure and supportive policies, observed Jean Lu, CEO and executive vice-chair for China at the bank.

“We do see a huge commercial room for RMB to catch up, in terms of (its) position in the global currency system,” she said on Tuesday (Sep 29).

Lu – together with Patrick Lee, CEO for Singapore, Asean and South Asia at StanChart – were speaking at the sidelines of Caixin Global’s Asia New Vision Forum: Innovation 2026, held from Sep 29 to 30.

They noted “a lot of continued potential” for the bank to tap the connection between China and Asean, as Chinese companies and wealth increasingly move overseas.

Lu sees several opportunities for offshore renminbi use.

Transactions with the renminbi as a settlement currency already account for more than 50 per cent of Chinese cross-border receipts and payments for trade and investment flows. There is also more infrastructure that is ready for renminbi settlement today, she added.

Borrowers who use it as a financing and investing currency also benefit from the low interest rate in China, Lu noted.

SEE ALSO

‘Stronger Asean’ should be shared priority for Singapore and China: DPM Gan

Asean’s challenge is to become resilient against global geopolitics: former Indonesia trade minister

StanChart sees China-Asean growth accelerating as ‘China Plus N’ strategy takes hold

Beijing’s tax crackdown tests wealthy Chinese property buyers in Singapore

More

Meanwhile, with regard to its use as a reserve currency, she expects that central banks will naturally increase their holdings as the currency becomes more widely used.

Still, she was emphatic that the renminbi was not about to displace the US dollar, adding that there is “no way, at least in my career” for such an event to occur.

One constraint is that the renminbi has limited liquidity in offshore markets, which are also separated from onshore markets, she pointed out.

But she believes that the renminbi can catch up and compete with other dominant currencies such as the yen and the British pound.

Chinese policymakers are currently trying to internationalise the renminbi, which means pouring liquidity into offshore markets, Lu said. Clients are also looking to diversify their currencies away from the greenback, she added.

Lee noted that with Asean building stronger trade ties with China, renminbi use is likely to increase as well, given that the Chinese are increasingly using the currency in their trade transactions.

“We see growth from a very low base,” he said.

Expansion of Chinese companies

The push for greater renminbi use comes as more Chinese companies grow overseas.

Lu noted that Chinese corporates have expanded in three waves. The first was driven by state-owned enterprises, while the second involved engineering, procurement and construction companies looking to set up overseas.

In the current third phase, the Chinese corporates that are expanding tend to be new technology companies with global aspirations.

“We will always tell the government authorities to not just constitute them as onshore (companies), because from day one they need to compete with global talent, global technology, global markets,” she said.

“Otherwise, there is no hope for these high-technology companies to survive.”

Lee said that China has also had decades of “tremendous growth” on the wealth side.

This wealth is searching around for new opportunities, such as in alternatives and the equity market, Lu observed.

China is also seeing strong intergenerational wealth transfer, with much of it being transferred from the first to the second generation, she added.

On the East Asian giant’s recent moves to tighten scrutiny over capital flows and cross-border investments, Lu said that such restrictions were “nothing new”; it was just that the authorities had renewed their focus on enforcing existing rules.

“For (StanChart), net-net, we will benefit,” she said. “For families who want to diversify their family wealth, they will diversify anyway. If they earn money, they will pay tax; so it’s a fair game for them.”

She added: “We do see that this is a kind of a milestone for China, to continue opening (its borders) and to support the globalisation and diversification (of family wealth).”

Lee said that this also gives places such as Singapore a strategic advantage, given its reputation for transparency and compliance.

Singapore and Asean are attractive to Chinese corporates and wealth, given their geographical proximity and similarities in cultures, languages and shared heritages, he noted.

Amid geopolitical tensions, the Asean region also offers supply chain diversification benefits.

Meanwhile, strong growth and demographics in Asean countries provide opportunities for Chinese companies to grow.

“We see this structural trend going to accelerate,” Lee added.