King & Wood Mallesons

Asia-Pacific 100 position: 3

The PRC legislative landscape for RMB internationalisation

By Jack Wang and Chen Yun

In the midst of its rapid economic development, the People’s Republic of China (PRC), the second-largest economy and the largest trading nation in the world, has finally determined to change its domestic currency market, which used to be pretty much closed to foreign investors over a long period of time and, accordingly, promulgated a series of laws and regulations to ease the previously tight foreign exchange (FX) control in the mainland. These laws and regulations were put in place to propel the internationalisation of Chinese Renminbi (RMB) by expanding the use of RMB under both current and capital accounts for the purpose of ultimately achieving an international status for the RMB matching the economic status of the PRC in the global economy. This chapter endeavours to outline a legislative landscape of RMB internationalisation from the following main aspects.

In July 2009, the PRC government launched a small pilot programme of RMB settlement to allow pilot enterprises in pilot areas to settle their cross-border import/export trades in RMB with qualified domestic settlement banks.

Thereafter, the relevant authorities gradually expanded the scope and variety of RMB cross-border settlement by means of enlarging the coverage of pilot areas and pilot enterprises and adopting a series of measures to loosen regulatory controls over cross-border current account items. At present, all enterprises in the PRC with export and import qualifications are permitted to settle their cross-border trades in goods, services and others under the current account items denominated in RMB, regardless of the location of the contract counterparties…

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