(China Alert) RMB Internalization: SDR inclusion is just the start

·We believe the outlook for the RMB’s inclusion into the IMF’s SDR basket is looking positive
·The RMB as a currency is becoming normalized
·RMB supply and demand remain at odds with each other

Update: RMB internationalization is the foundation of the opening of China’s capital account. The currency’s imminent inclusion into the IMF’s Special Drawing Rights (SDR) will be a trigger for a fundamental shift in how the currency is used abroad. What’s more, this transition is already well underway. The RMB’s 2% devaluation against the USD in Q3, the drop of China’s foreign exchange reserves by USD480bn (10%) over the past 15 months and the launch of the Cross-border Inter-bank Payment System (CIPS) this month are just the beginning. Understanding (and preparing for) this shift will be essential. The transition has not been and will not be seamless and all global markets – most notably the US – will soon see its effects at their doorstep.

Z-Ben Advisors’ detailed analysis indicates that the RMB could be effectively liberalized as soon as ……

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