On June 8, the London Stock Exchange issued the first Chinese offshore sovereign bond, setting the table for the internationalization of the Renminbi currency. This move had been months in the making when the City of London had signed an agreement to participate in Yuan denominated Chinese bonds being sold in their global markets.
This move also is another step in China’s ultimate plan to have the Yuan currency be on par or greater than the dollar as a medium of trade, especially following last year’s acceptance into the IMF’s SDR basket of reserve currencies.
For any currency to reach the stage of internationalization, bond hubs must be established where foreign countries and investors can have access to buying these bonds, and allowing for an expansion of the originator’s currency within the global monetary system.
Yet China’s partnership with the London Stock Exchange is not the only new activity for Yuan internationalization this week. In fact, on the same day of their new bond issuance in London, the country’s Renminbi Qualified Foreign Institutional Investor (RQFII) campaign opened up in the United States with a licence to allow U.S. investors to buy renminbi-denominated A shares in companies on Chinese exchanges.
As the world pursues an agenda of de-dollarization, and use the Euro, Pound, and Yen stagnate or slowly decline, the star rushing in to fill the gap is acting quickly to internationalize their currency in trade, equities, bonds, and credit markets. And over the next years, or perhaps as quickly as just a few months, the world will have a choice in which medium of currency to conduct trade in, and it is becoming more likely that their primary currency of choice will be the Yuan.