{"text":[[{"start":7.16,"text":"The writer is chief economist for Asia Pacific at Natixis and senior research fellow at Bruegel"}],[{"start":13.28,"text":"The debate about the renminbi’s global rise usually gets the sequencing wrong. It treats internationalisation as a single ascent, with reserve-currency status at the summit."}],[{"start":23.96,"text":"In practice there are three separate climbs of very different difficulty: trade, borrowing and, hardest of all, investment. China has made much progress on the first two over 15 years. The last — persuading foreigners to hold renminbi as an investment — has only now started, and last June’s Lujiazui Forum in Shanghai set the stage for the way forward."}],[{"start":47.68,"text":"The orthodox path runs through the capital account: open your markets, run external deficits, let non-residents accumulate your currency. But China cannot and will not take that route. So it has pushed the renminbi outward by other means — trade settlement and credit extended by its own banks."}],[{"start":65.56,"text":"Both have worked. The renminbi share of China’s goods trade has roughly doubled since 2018 and the currency now ranks second in global trade finance, ahead of the euro — driven as much by the weaponisation of the dollar as by China’s leverage as the world’s largest commodity buyer. Funding has followed: the renminbi became one of Asia’s cheapest funding currencies and Chinese banks have been increasing lending to overseas clients."}],[{"start":90.92,"text":"But holding a currency is a different act. A currency becomes a reserve asset not when it is used but when it is willingly kept — because the assets denominated in it can be traded deeply, financed against and hedged at will, in good times and bad. That is why US Treasuries sit at the centre of the system."}],[{"start":null,"text":"
"}],[{"start":109.52,"text":"A foreign institution holding Chinese government bonds has had neither comfort. Onshore liquidity is far thinner than the US Treasury market’s, hedging instruments are scarce, and repatriating proceeds still runs into frictions a reserve manager cannot ignore. The reluctance shows in the data: foreign holdings of onshore bonds are under 2 per cent of the total and down from a peak above 3 per cent and central bank reserves in renminbi are around 2 per cent as well as flat."}],[{"start":136.2,"text":"This is what measures unveiled at the June forum are meant to address: the first coherent attempt to build the missing plumbing without touching convertibility. A liquidity backstop for foreign and international monetary authorities announced by the PBoC in June models a similar structure to the Federal Reserve."}],[{"start":152.48,"text":"In addition, Hong Kong is launching Chinese government bond futures, closing the gap in hedging facilities that has kept large global managers on the sidelines. And a nascent securities depository based in Hong Kong, Omniclear focuses on offshore renminbi settlements, which could become an alternative to Euroclear. Each tackles a real obstacle to holding, rather than merely using, the currency, potentially fostering its use as investment currency."}],[{"start":null,"text":""}],[{"start":179.2,"text":"Yet the constraints remain unforgiving, and every fix is a second-best. The repo facility is open only to the official sector. And a backstop supplied at the discretion of the issuing central bank is only as good as that discretion — and reserve managers diversifying because the dollar was turned into an instrument of policy will not be blind to the politics of a currency whose issuer has far more room to intervene. A parallel settlement rail carries no weight until others use it; the network effects that make Euroclear and the dollar’s plumbing indispensable cannot be legislated into existence."}],[{"start":212.72,"text":"And the economics point the wrong way: onshore yields have fallen so far that Chinese bonds now offer some of the world’s lowest returns, so they hold little appeal for any investor. What is left is the case for diversification alone."}],[{"start":226.28,"text":"That is Beijing’s bet — that the desire to move away from the dollar will outweigh these frictions for at least some official holders. At the margin it may be right. But it runs into the contradiction at the heart of the project. Trade invoicing can be engineered and credit extended by fiat; genuine demand to hold renminbi assets cannot. It requires ceding control — over prices, over exit, over the capital account itself — and convincing others the control will not be reasserted the moment it becomes inconvenient. But, of course, control is what Beijing refuses to give up."}],[{"start":260.2,"text":"The direction of travel is not in doubt, and a fracturing global economy is doing much of Beijing’s work for it. But whether the renminbi becomes a currency the world chooses to save in — rather than one it is merely paid in — is a question an administrative push cannot answer. It is the hardest mile, and it has only just begun."}],[{"start":282.2,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1786439013_7966.mp3"}