| SYDNEY, March 26
SYDNEY, March 26 China's ambitions to
internationalise the renminbi are likely to be a "seismic event"
for global markets, leading to large capital flows and perhaps a
new reserve currency, a top Australian central banker said on
Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe
said the process had some way to go yet but that Beijing had
signalled its seriousness by widening the trading band for its
currency last week.
"The internationalisation of the RMB - and China's
associated move towards a liberalised capital account and more
flexible exchange-rate regime - has the potential to create a
seismic shift in the international monetary and financial
landscape," Lowe said in a speech.
"History teaches us that financial deregulation is an
inherently risky process, but that there are substantial payoffs
if it is done well," he added.
China is already Australia's biggest single trading partner,
taking over a third of the country's exports.
An eventual freeing up of the capital account would likely
lead to significant flows of Chinese funds offshore and greater
demand for products with which to hedge foreign currency risk,
Deregulation would not be without risks, particularly as
China's financial sector was already very large relative to its
But Australia's experience with floating its currency
showed there were substantial benefits, including greater
control of monetary policy.
For China, it might ultimately lead to the renminbi becoming
a global reserve currency alongside the U.S. dollar, Lowe said.
It could also be a boon for Australian banks and fund
managers, opening up increased investment opportunities within
China and helping to manage Chinese flows into Australia, Lowe
(Editing by Jan Paschal)