New Bank Department To Handle RMB Global Development

September 8, 2009 Posted by China Briefing Reading Time: < 1 minute

Sept. 8 – China’s central bank, the People’s Bank of China (PBOC), will establish a Second Monetary Policy Unit to deal with a wide range of commercial issues concerning the use of the renminbi in international trade, investment, swaps and foreign aid.

The unit is will be led by current PBOC Vice-Governor, Hu Xiaolian. The aim is to seek a broader role and globalize the use of the renminbi as a currency unit. The new unit differs from the existing Monetary Policy Department, which is an advisory body focused on the currencies domestic use, proposing local monetary policy to the PBOC.

Hu is an expert on foreign exchange and the role of how currencies play within it. The move signifies government plans to ultimately have a fully convertible and internationally traded renminbi. Some initial steps have already been taken to deal with this, including the permission to use the renminbi to settle trade transactions between Hong Kong and China, and the Vietnamese border.

China believes longer term it can provide a global currency to challenge, or act as a reserve global currency against the US dollar. The establishment of the Second Monetary Policy Unit is likely to fast track the goal of permitting the RMB to be freely traded.