China should press ahead with its cautious and gradual program of financial reform amid the internationalization of the yuan or renminbi, as the country's economic progress is important on a global level, Reserve Bank of Australia Assistant Governor Guy Debelle said Wednesday.
"In light of this history, and given the importance of China to the global economy, China's authorities have good reason to continue pursuing a cautious and gradual program of financial reform," Debelle said in a speech delivered via video at the RMB FX Forum in Beijing.
Citing Australia's experience when it floated its currency in 1983 and that of other countries who pursued financial reform and capital account liberalization simultaneously, Debelle said nearly all them then experienced episodes of financial instability.
"[This] suggests that it can be beneficial to establish a strong prudential supervision framework before the financial sector and capital account are fully liberalised," the policymaker stressed.
"This mitigates subsequent risks to financial stability," he added.
Debelle also noted that the use of renminbi is growing in Australia, though it is noticeably less than the value of trade with China. He also said that the renminbi hedging instruments and markets are growing rapidly.
The RBA policymaker, who chairs the BIS committee formulating the Global Code of Conduct for the Foreign Exchange Market, said the 2016 Triennial FX turnover survey is likely to show rapid growth in renminbi turnover over the past three years as revealed by the 2013 study.
"Turnover is likely to be bolstered by measures taken by the People's Bank of China to increase trade settlement and investment in renminbi, as well as the various exchange rate initiatives that the PBoC has taken since 2013," Debelle said.
"The 2016 Triennial FX turnover survey will likely confirm that the RMB is solidly in the top 10 currencies in terms of turnover, and may indeed be closing in on the Australian dollar, which is in fifth place in terms of turnover."
The International Monetary Fund included the Chinese yuan or renminbi in its basket of reserve currencies late last year.
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