The official launch of China's central bank digital currency may be closer than ever but this event is unlikely to affect the RMB, according to economists at HSBC who believe the sentiment towards renminbi should get better regarding improved US-China relations.
“In April, there were media reports about the PBoC conducting trials on a digital currency in certain cities and a screenshot of the user interface of a beta version of a mobile app developed by one commercial bank was even leaked. We believe the official launch of 'e-RMB' is probably close.”
“Since 'e-RMB' seems to be currently only aimed at partially digitalising currency in circulation and considering China's present capital account restrictions, we believe a launch is unlikely to have much implications for the direction of the RMB exchange rate in the near-term. However, 'e-RMB' could facilitate RMB internationalisation and the diversification of the current USD-centric international monetary system in the long run.”
“One of the near-term key drivers for the RMB will remain the development of US-China relations. The meeting between US State Secretary Pompeo and Chinese official Yang Jiechi on 17 June is read by the market as a sign of a near-term improvement in the US-China relationship. The northbound Stock Connect registered inflows on 18 June, after a couple of days of outflows amid concerns over a COVID-19 second wave. This should also have helped sentiment towards the RMB in the near-term.”
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