China-Asean trade is expected to reach USD500
billion by 2015, according to figures revealed at the China-Asean Beijing
Economic Forum held in December 2011. The trade volume was almost USD356
billion in 2011, representing 9.9 percent of China’s total foreign trade.
Trade
betwen the two parties has received a boost owing to the China-Asean free trade
agreement in early 2010. China is now Asean’s largest trade partner while Asean
is ranked the third-largest trade partner with China after the European Union
and the United States.
It
might be a natural development to grow the renminbi as a regional currency – as
a precursor to take it global. The Asean countries, which include nations
ranging from resource-rich Indonesia to financial centre Singapore, are home to
600 million people with a combined gross domestic product (GDP) of USD2
trillion. In addition, they are a source of commodities such as natural gas and
crude palm oil, which are important to support the Chinese economy.
Total
renminbi foreign exchange (FX) trade in Singapore swelled to SGD428 billion in
2011, a ten-fold jump from 2010. This cements Singapore's position as another
potential offshore market for renminbi trade after Hong Kong within the region.
Singapore’s reputation as a major trade redistribution centre and a gateway to
the Asean region has managed to attract a steady stream of investors keen to
transact in renminbi.
The
other Southeast Asian markets of Thailand, the Philippines, and Malaysia are already
seeing substantial redenomination and renminbi payment flows, and this will
continue to grow as their dependency on China trade increases.
China
has become Thailand’s second- largest export market and its second-largest
source of imports. China has also already signed bilateral currency swap
agreements with three Asean nations, namely Indonesia, Malaysia and Singapore.
Currency
wise, the US dollar is still the most commonly used currency as a means for
trade transactions with China in the region. The renminbi can be deemed
underutilized at both the internationalization and regionalization levels and
has potential for substantial growth to develop towards a global currency.
While
financial infrastructure will require significant transformation to accomplish
widespread internationalization, Asean looks set to be increasingly
instrumental in the regionalization and subsequent internationalization of the
renminbi as it moves towards becoming a true global reserve currency.
Lee Bee
Bee
Business & Investment Opportunities
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