Shanghai's foreign trade has experienced growth in the first three quarters of this year, with imports and exports reaching 3.17 trillion yuan (US$441.6 billion), a 2.7 percent increase compared to the previous year [2a7e65aa]. Shanghai's exports rose by 3.9 percent to 1.3 trillion yuan, while imports increased by 1.8 percent to 1.87 trillion yuan [2a7e65aa]. Additionally, Shanghai's trade with the European Union saw a 5.4 percent year-on-year increase, accounting for 20.2 percent of its total foreign trade volume [2a7e65aa]. Furthermore, Shanghai's emerging products, including electric vehicles, lithium batteries, and solar cells, experienced a significant year-on-year increase of 79.5 percent, amounting to 10 percent of the city's total export value [2a7e65aa]. On the other hand, Shanghai imported consumer goods worth 422.23 billion yuan, a 9 percent increase compared to the previous year [2a7e65aa].
In addition to the growth in foreign trade, China's cross-border use of RMB has also seen a significant increase. RMB payments and receipts expanded by 24 percent year on year, reaching 38.9 trillion yuan (US$5.42 trillion) in the first nine months [8e9c0a05]. This growth in cross-border RMB transactions has played an improved role in serving the real economy [8e9c0a05].
China's central bank digital currency (CBDC) has been used for cross-border precious metal payments. The Bank of China collaborated with the Shanghai Gold Exchange to settle a 100 million RMB ($14 million) gold trade between Shanghai and Hong Kong. Bank of China Hong Kong was also involved in the transaction [f8e9e978]. Additionally, the Bank of China participated in a cross-border transaction for iron ore with China's Baowu, the state-owned iron and steel company [f8e9e978].
In October, China signed a digital RMB collaboration agreement with the UAE and is expected to launch a minimum viable product in mid-2024 [f8e9e978].
The Bank of China's Shanghai Branch completed the first cross-border digital yuan (RMB) transaction, settling a 100 million yuan trade in partnership with the Shanghai Gold Exchange. This marks the debut of international digital RMB payments. The branch previously executed the first cross-border digital RMB payment in the commodities field, purchasing imported iron ore for Baowu Group [473442f7]. China is actively participating in trials by the Bank of International Settlements and is focusing on cross-border transactions using digital currencies. 130 countries are actively considering CBDC adoption. Stablecoins adoption has also caught the attention of central banks. The governor of the Bank of Korea highlighted the challenges stablecoins present to financial stability and the necessity for central banks to accelerate the deployment of their digital currencies [473442f7].
Cross-border renminbi (RMB) payments and receipts expanded 24 percent year on year to 38.9 trillion yuan (5.42 trillion U.S. dollars) in the first nine months, playing an improved role in serving the real economy, China's central bank said. Cross-border goods trade settled in RMB accounted for 24.4 percent of the total cross-border goods trade settled in both domestic and foreign currencies, up 7 percentage points year on year and the highest level seen in recent years. The function of the RMB as a financing currency continues to improve. Trading on the offshore RMB markets has become more active, with the balance of RMB deposits on the main offshore markets returning to a historic high [87464cd0].
Hong Kong's financial secretary, Paul Chan, announced plans to develop an offshore Renminbi (Rmb) ecosystem to promote the currency's internationalization. The government aims to facilitate Rmb cross-boundary investment and two-way fund flows between Hong Kong and mainland China. The goal is to attract more enterprises to Hong Kong and tap into both international and onshore currencies. The global use of Rmb in trade settlement, investment, and currency reserves remains low at around 3% of the total, indicating significant growth potential. Hong Kong is actively seeking investment from other regions, including the Middle East and Southeast Asia [453c2b80].
China's southern province Guangdong plans to issue up to 7.5 billion yuan (US$1.03 billion) of offshore yuan-denominated bonds in Hong Kong and Macau, in an effort to internationalize its currency and strengthen Hong Kong's role as an offshore yuan hub. The province's Department of Finance is hiring bookrunners for bond issuances of up to 5 billion yuan in Hong Kong and 2.5 billion yuan in Macau, with a maturity of no more than five years [4c5725c4]. This follows Shenzhen's announcement of a US$964.4 million sale of offshore yuan-denominated bonds. Last year, dim sum bonds issued in Hong Kong increased by 65% to 550 billion yuan. Hong Kong's offshore yuan bonds increased by around 15% year on year in the first quarter of this year. China's Ministry of Finance plans to issue 55 billion yuan worth of treasury bonds in six tranches in Hong Kong this year. Hong Kong Monetary Authority (HKMA) CEO Eddie Yue Wai-man aims to strengthen Hong Kong's role as the global offshore yuan hub [4c5725c4].
Experts believe that a monetary union in the Greater Bay Area (GBA) will happen in the long term, possibly in 20 years. The three currencies used in the GBA (yuan, Hong Kong dollar, and pataca) may be integrated into a common currency or an exchange rate mechanism. However, there are more sophisticated ways for financial integration, such as the use of digital currency and automation clearing systems. The change to a single currency system may have a cost for China, as it would require giving up capital control and allowing the RMB to be convertible without government interventions. The use of three currencies in Macau can be seen as a way to avoid inflation tax, but it comes with transaction costs. The government is eager to ensure price stability for social harmony. The timing of the monetary union depends on factors such as the elimination of capital controls and the economic developments in the region. The article features insights from Jacky So, Chair Professor of the School of Business at Macau University of Science and Technology (MUST), and Emil Marques, Senior Lecturer from the Faculty of Business and Law at the University of Saint Joseph [eb43105c].