When talking about world currencies, perhaps the first thing that comes to mind is the US dollar. And this situation may soon become a thing of the past.
On July 21, the “Notice on Supporting Cross-border RMB Settlement of New Foreign Trade Business Forms” recently issued by the People’s Bank of China was officially implemented. Industry experts said that by then, the hegemony of the US dollar will be further weakened, and the world’s settlement currencies may be diversified or enter the fast lane.
Main contents of the “Notice”
The main contents of the “Notice” include: First, increase support for new foreign trade formats and improve cross-border RMB business-related policies for new foreign trade formats such as cross-border e-commerce. The second is to expand the scope of cross-border business processing of payment institutions from trade in goods and trade in services to all current accounts. The third is to clarify the business development and filing requirements for banks, payment institutions and other relevant business entities. The fourth is to clarify the requirements for business authenticity review, anti-money laundering, anti-terrorist financing, anti-tax evasion, and data reporting, consolidate the responsibilities of banks and payment institutions, and prevent and control business risks. The “Notice” will be implemented from July 21, 2022.
From the 21st, 1.4 billion people in China, 140 million people in Russia, 1.4 billion people in India, 220 million people in Pakistan, 80 million people in Iran, 600 million people in ASEAN, plus some non-European countries, can use non-US dollar payment systems. Easily exceeded 4 billion.
The RMB settlement order issued by the People’s Bank of China may become another historical node that accelerates the decline of the US dollar’s hegemony.
In the first four months of this year, the scale of cross-border RMB receipts and payments for my country’s trade in goods totaled 2.2 trillion yuan, a year-on-year increase of 26%. It accounted for 16% of cross-border receipts and payments in domestic and foreign currencies for trade in goods, an increase of 1.3 percentage points from the end of last year; The scale of direct investment in RMB cross-border receipts and payments totaled 1.9 trillion yuan, a year-on-year increase of 19%, accounting for 66% of direct investment in cross-border receipts and payments in domestic and foreign currencies.
The central bank stated that it will steadily promote the implementation of the “Notice”, provide good supporting financial services for new foreign trade format market entities, effectively play the positive role of cross-border RMB business in serving the real economy, promote the high-quality development of new foreign trade formats, and support and guide The healthy, sustainable and innovative development of new foreign trade business formats and models has helped stabilize the macroeconomic market.
What impact will it have on textile people?
Reduce the risk of exchange rate fluctuations
In the past, most of the foreign trade done by textile people was settled in US dollars, and then the foreign exchange was settled at a specific time. There were many risks in the exchange rate fluctuations between the transaction and the settlement, which may allow the textile people to make more money, but it also It may turn some orders from making money to losing money.
For textile companies, fluctuations in exchange rates are not a good thing. Only a relatively stable exchange rate is most suitable for companies to quote and settle payments. Once they choose to de-dollarize and settle in RMB, the risk of exchange rate fluctuations can be greatly reduced.
Reduce the possibility of imported inflation of raw materials
The United States’ unlimited “printing of money”, when it reaches a certain amount, will inevitably introduce systemic inflation to the world. Just after the Spring Festival this year, it is because of systemic inflation and the partial recovery of the market that all kinds of raw materials have risen beyond expectations. Although Recently, the growth rate of polyester chemical fiber raw materials has hit a ceiling, but many chemical raw materials still retain the momentum of price increases, and the cost of dyes has risen sharply.
Judging from the recent news, the United States has introduced bills to print money one after another, each worth trillions of dollars. This has really made countries around the world feel the real risk of inflation. For textile companies, reducing the use of U.S. dollars between countries actually reduces the possible impact on raw material prices caused by the United States’ “water release.”
Industry analysts said that at present, when the U.S. dollar interest rate hike cycle begins, economic recession expectations are rising, and commodities fluctuate violently, the RMB should seize the opportunity to innovate the current world monetary system and actively strengthen the pricing and pricing of commodities in global settlements. Gain greater say in influencing the global capital market.
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