German Banker Says Foreign Investors Lack Trust In Chinese RMB

A senior German central banker has warned that “discreet policy interventions” in China’s renminbi (Rmb) are not helping the country’s exports. Instead, they are leading to a lack of trust in the currency by foreign investors, GTR reported Wednesday (Jan. 17).

Speaking in Hong Kong this week, Andreas Dombret, a member of the executive board at Bundesbank, said the renminbi lacks freedom and transparency — qualities necessary for the currency to be truly international.

Dombert was openly critical of the People’s Bank of China’s “somewhat difficult to predict changes in regulation, and the perceived high degree in political interference in the Rmb price formation.” As a result, he explained, foreign investors have a lack of trust in the system. Dombert also noted the value of the renminbi actually doesn’t provide Chinese exporters with a competitive advantage.

“That is something that our estimates don’t really show,” he said. “On the contrary, price competitiveness of the Chinese economy is estimated to be rather low, and from this perspective, accusations of an undervalued Rmb are actually not warranted. This is not something we would subscribe to.”

Traditionally, China’s renminbi has not been viewed as a global currency, largely due to stringent government controls on the yuan. It also lacks the infrastructure to gain prominence.

The complex network of banks and clearing houses — plus the requisite for maintaining multiple foreign accounts, complex routing procedures and even time zone differentiations — means there is no synchronization between China’s domestic payment system and its capital controls. The nation’s central bank is reportedly looking to enhance the efficiency of cross-border payments by lengthening the operating hours of its payments clearing system for high-value transactions in 2018.

According to recent Reuters reports, three unnamed sources said China’s central bank will open the country’s large-value payment system up to operate 21 hours beginning Monday (Jan. 22). The system will be open from 11:30 P.M. to 8:30 P.M. the next day, and operate Monday to Friday. Sources said the clearing window will be open from 9:15 P.M. to 8:30 P.M.