The rise of the Chinese currency is a positive development for emerging markets as it provides an important alternative in the area of currency investment and hedging, a senior official from Standard Chartered Bank said on Monday.
Sunil Kaushal, the bank’s regional chief executive officer, Africa and Middle East said the rise of the Chinese Renminbi (RMB) will help countries in Africa and in the Middle East to reduce their dependence on developed market currencies.
The rise of the Chinese currency is cemented by its recent inclusion in the International Monetary Fund’s Special Drawing Rights (SDR) basket of currencies, he added.
The SDR is a supplementary international reserve asset, in the context of the Bretton Woods fixed exchange rate system.
“This will help countries in Africa and the Middle East to reduce their dependence on developed market currencies because an additional major, global currency brings diversity, choice, and ultimately, increases the general influence of emerging markets on the global currency stage,” he said in his opinion article called “What the Renminbi (RMB) means for Africa?”
The financial expert said since trade remains the primary economic driver in growing emerging markets, exporters and importers who trade with China will be able to reduce the risk and cost associated with converting local currencies to the US dollar by switching to the Chinese currency.
He added that adopting the Chinese currency could make Chinese imports cheaper, with some Chinese suppliers willing to lower their prices to reflect lower foreign exchange costs.
“Likewise, for the wider Middle East and Africa region, China is becoming an increasingly important partner for trade and investment. For this reason, countries here stand to benefit significantly from the internationalization of the Chinese currency,” he said.
Feb. 9, 2017 on XinhuaNet
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