With a new renminbi clearing center, Beijing takes an important step forward.
China established a renminbi clearing center in Qatar in April. The center is the first in the Middle East to offer local financial institutions access to Chinese renminbi and foreign exchange markets. It also aims to facilitate greater cross-border use of the RMB and increase opportunities to expand trade investment between Beijing, Doha, and the wider region. The initiative is another step by the Chinese government towards its goal of becoming a major economic player in the region and beyond.
As its economic clout grows, especially in the wake of the global financial crisis, China has attempted to globalize the use of its currency so as to minimize reliance on the American dollar. For China, worldwide use of the renminbi would reduce the cost of financial transactions by permitting the direct exchange of RMB claims with non-USD currencies. It also raises demand for RMB-denominated assets globally, as financial institutions seek more RMB liquidity. At the same time, when more and more trade is dominated in RMB, it minimizes the need for China’s central bank to hold global reserves in American dollars.
Since it was inaugurated in 2008, the globalization of the RMB has made considerable progress. It is reported that the renminbi is now the world’s second most widely used currency. China has liberalized the offshore yuan market and enlarged offshore RMB centers around the world, including London, Taiwan, and Singapore.
The establishment of the renminbi clearing center in Doha must also be viewed in a geopolitical context. It is another important step for China in creating a new multipolar international order, with an increasing concentration on Asia and international value chains emerging from the Silk Road Economic Belt. The internationalization of the RMB is an important element in the financial infrastructure for Asian capital markets. With the center initiative, Qatar and other countries in the Middle East are invited to participate in establishing the new global economic order and play their own role in the Silk Road initiatives.