Table of Contents

According to reports, the head of the Hungarian Central Bank, Mao Torci Jierji, stated at the “Financial Infrastructure and Financial Services in the Digital Era” roundtable at the 2023 annual meeting of the Boao Forum for Asia that the RMB is on the rise and its importance is becoming stronger and stronger. However, this is a process of deep change, and one cannot rush. In the future, the RMB will definitely become the most important global currency, alongside the US dollar.

Governor of the Central Bank of Hungary: There is a trial and error process in digital currency, and it is necessary to strengthen the supervision of digital currency

1. Introduction
2. The Rise of the RMB
3. The Importance of the RMB
4. Challenges Facing the RMB
5. Future of the RMB
6. Conclusion
7. FAQs
# According to Reports, the RMB to Become the Most Important Global Currency in the Future
The Head of the Hungarian Central Bank, Mao Torci Jierji, stated at the “Financial Infrastructure and Financial Services in the Digital Era” roundtable that the RMB is on the rise and its importance is becoming stronger and stronger. However, this is a process of deep change, and one cannot rush. In the future, the RMB will definitely become the most important global currency, alongside the US dollar.

The Rise of the RMB

The Chinese Renminbi (RMB), also known as the Yuan, has been on a steady rise since 2010 when it overtook the Euro as the second most-used currency in global trade finance. According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the RMB was the fourth most-used currency for international payments in January 2021, after the US dollar, Euro, and Pound Sterling.
The rise of the RMB is largely due to the rapid growth of China’s economy, which is now the second-largest in the world. In addition, China has been promoting international use of the RMB through measures such as the use of RMB for cross-border trade settlement, establishment of offshore RMB hubs, and inclusion of the RMB in the International Monetary Fund’s (IMF) Special Drawing Rights basket.

The Importance of the RMB

The increasing importance of the RMB is beneficial for China as it can reduce reliance on the US dollar and enhance its financial power. China’s large foreign exchange reserves are mainly denominated in US dollars, which exposes the country to the risk of devaluation or inflation of the US dollar.
Moreover, the use of the RMB can reduce transaction costs for Chinese firms and make China’s exports more competitive in the global market. Internationalization of the RMB can also lead to greater financial integration, especially in Asia, which can strengthen regional economic ties and promote financial stability.

Challenges Facing the RMB

Despite the RMB’s progress, there are still challenges facing its internationalization. One of the main obstacles is the lack of liquidity in RMB-denominated financial products. Another challenge is the lack of trust from foreign investors and financial institutions in the stability of China’s financial system, which has been plagued by issues such as weak corporate governance and non-performing loans.
In addition, China’s capital account is not yet fully open, which limits foreign access to RMB-denominated investments. The Chinese government is gradually liberalizing the capital account, but it believes in a cautious and gradual approach to avoid financial instability.

Future of the RMB

Many experts believe that the RMB will continue to rise and eventually become a major international currency. The IMF has recognized the RMB as a reserve currency, and many central banks around the world have included the RMB in their foreign reserves. This trend is expected to continue as China’s economy grows and Chinese financial markets become more integrated with international standards.
However, the RMB still has a long way to go before it can challenge the US dollar’s dominance as the world’s main reserve currency. The US dollar’s deep and liquid financial markets, as well as the strength of the US economy, are key factors in its continued dominance.

Conclusion

In conclusion, the RMB is on the rise and its internationalization is steadily progressing. The increasing importance of the RMB can benefit China’s economy and enhance its financial influence. However, there are still challenges facing its internationalization, and the RMB has a long way to go before it can rival the US dollar’s dominance.

FAQs

1. What is the RMB?

The RMB or the Chinese Renminbi is the official currency of China.

2. Why is the RMB becoming important?

The RMB is becoming important because of the rapid growth of China’s economy, and China’s promotion of international use of the RMB through measures such as the use of RMB for cross-border trade settlement, establishment of offshore RMB hubs, and inclusion of the RMB in the IMF’s Special Drawing Rights basket.

3. Will the RMB surpass the US dollar?

Many experts believe that the RMB will continue to rise and eventually become a major international currency. However, the US dollar’s deep and liquid financial markets, as well as the strength of the US economy, are key factors in its continued dominance.