On April 28th, Dr. Alfred Schipke, the IMF Senior Resident Representative in China, delivered a speech on China’s economic status, followed by a heated discussion with the audience on RMB Internationalization Development and Prospects at the school of Economics and Management, Wuhan University.

Dr. Schipke started the lecture by showing China’s status in the world through analyzing China’s GDP and global share of trade with the help of diagrams. Although with a relatively low per capita GDP, China is undergoing rapid economic development due to its overall GDP and its global share of trade. It is beyond doubt that international trade has contributed a lot to China’s economic growth, which in consequence has made the RMB more international.

However, although the Chinese currency has been increasingly used for international payments, growth in offshore RMB deposits still lingers at a low level. In addition, the RMB share in international debt securities and global foreign exchange market turnover is still relatively small. Since RMB is not a fully convertible currency, no data is available on how many foreign central banks hold RMB deposits.

Amid the heated discussion, Dr. Schipke made a summary of the determinants in the process of RMB internationalization: proxies for RMB internationalization as dependent variables, policies and proxies for RMB appreciation expectation as independent variables, control variables such as HK total deposit and finally, China’s total trade, RQFII(RMB Qualified Foreign Institutional Investors) and SWAP. Among the factors mentioned above, appreciation expectation is considered the most important, which means growth in offshore deposits and bonds.

There’s still a long way to go before reaching a true RMB internalization, but things are moving on the right track. Besides, RMB was nominated for the SDR basket. Dr. Schipke also noted at the end of his speech, 'the statement that RMB inclusion is not a matter of if but when confirms RMB’s status in the world'.