You should not “think the unthinkable” to understand the negotiability of the Renmimbi in New York. Since this week, customers of the Manhattan branch of the Bank of China (ironically located in Chinatown) can buy and sell, with some limitations, the Chinese currency, few steps away from Wall Street.
Yes, the news is striking, and it is announced few days from Hu Jin Tao’s visit to Washington. Yet, it does not represent the capitulation of the citadel after the Rmb’s siege. It is just another step towards its full convertibility.
Hong Kong is the designated market to handle the new task. Last year the SAR started Renmimbi-denominated transactions with Beijing. The move followed some States’ decision, Malaysia and Russia among them, to use the Chinese currency to pay for commercial exchanges. The Asian Development Bank has already issued Rmb bonds. The same practice has been undertaken by multinationals like McDonalds’s, Caterpillar, and Hopewell.
The conclusion proves simple: if currencies follow business and growth, then Rmb’s choice comes immediately to mind. It simultaneously reduces the uncertainty about exchange rate fluctuations and the Us dollar’s inevitable medium-term declining value. Rmb’s convertibility requires a long way to go, but it will be quicker than forecast. Its availability in New York marks another achievement: meaningful, but not the final one.