It is not yet a flood, but the trickles eroding the walls that keep China’s currency within the country’s territory are beginning to add up to something.
Already last year, the renminbi debuted as a currency for bond financing by multinational corporations (McDonald’s); trade credits (to an Indonesian group by the Industrial and Commercial Bank of China); and offshore deposit accounts (to the Bank of China’s personal banking clients in London, New York and other cities).
Last week, further holes were pierced in the dam of non-convertibility. Pharo Management, a hedge fund manager, announced it will offer renminbi-denominated shares in its funds. The city of Wenzhou launched a pilot project to lighten restrictions on its residents’ ability to invest money offshore. And a year and a half after Chinese corporations were allowed to settle cross-border trades in their own currency, permission has also been granted to use renminbi to acquire or found new operations overseas.