The Chinese currency challenge

Australia could benefit substantially from the opening up of China’s capital markets, but this will require changes in policy settings and increased market awareness, a new report from UNSW's Centre for International Finance and Regulation has found.

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Australia could benefit substantially from the opening up of China’s capital markets, but this will require changes in policy settings and increased market awareness, a report from UNSW's Centre for International Finance and Regulation (CIFR) has found.

CIFR has released a 128-page research report into the internationalisation of the renminbi (RMB) and its implications for Australia, authored by CIFR research fellows Dr Kathleen Walsh and Mr Geoff Weir,  and Professor Barry Eichengreen from University of California Berkeley.

The report includes in-depth analysis of the Chinese financial landscape and interviews with more than 100 Chinese and Australian companies.

Some countries and financial centres would benefit more than others from RMB internationalistion, Dr Walsh says.

“In Australia’s case, its very close trading ties with China, its funds management expertise, its natural endowments in sectors of strategic importance to China and its ongoing need for overseas capital to help fund investment all suggest considerable scope for building much closer and mutually beneficial financial ties between the two countries,” she says.

But Mr Weir warns this won’t happen automatically: “For Australia to benefit from the coming changes in global financial markets, we will need to make sure we have the right financial architecture and policy settings in place in Australia."

The report was launched this week at a Symposium in Sydney, where CIFR executives and research fellows were joined by RMB experts from the Bank of China; the Reserve Bank of Australia; the Australian Treasury; Schroder; ANZ; the ASX; the Australian Financial Markets Association; the Australian National University; the University of Auckland and the Chinese Academy of Social Sciences.

For key insights and recommendations, or to download the report, go to the CIFR website.