BOJ weighs use of Chinese renminbi as reserve currency
Jamaica's central bank is eyeing the Chinese renminbi, the RMB, as an opportunity to reduce reliance on US dollar usage in the Jamaican economy.
John Robinson, senior deputy governor of the Bank of Jamaica, said "given China's significant investments in Jamaica and Jamaican businesses' high trade volume with China, there may be opportunities to reduce the need for a third currency - the USD - for settlements of transactions".
His response to Financial Gleaner queries followed comments made last week by BOJ Governor Brian Wynter at a Jamaica Chamber of Commerce forum, where he told business representatives they would be hearing more about the RMB, without elaboration, amid discussions on the new foreign exchange trading tool, B-FXITT, introduced in July by the central bank.
"The renminbi is the latest addition to the list of international reserve currencies. Therefore, consistent with the bank's reserve management policies, we have been investigating the risks and opportunities of adding the renminbi to our holdings based on Jamaica's current and capital transactions with China," said Robinson on Monday.
"As always, we will keep the public regularly informed as to the level and composition of Jamaica's foreign reserves," he said.
The renminbi is now used to settle approximately 18 per cent of China's total trade.
There was no immediate feedback from the Jamaican banking sector and treasury managers on what this signal implies for them.
However, that BOJ is looking to the RMB is not entirely surprising, given the midyear pronouncements by the Caribbean Development Bank (CDB) that regional jurisdictions should consider the RMB as a way around correspondent banking challenges.
CDB President Dr Warren Smith said at the bank's July conference that now that Caribbean economies are recipients of foreign direct investments flows or trade flows denominated in the Chinese currency, they can now conduct transactions using Chinese banks as correspondent partners, through cross-border interbank payment systems - alleviating the need for traditional relationships underpinned by western banking networks in North America and the United Kingdom.
In the wake of a conference on the issue, CDB Director of Economics Dr Justin Ram told the Financial Gleaner that the renminbi provides opportunities for Caribbean economies with respect to trade facilitation, investment and aid flows.
In 2016, the International Monetary Fund added the Chinese yuan to its basket of currencies for the calculation of special drawing rights, or SDRs, putting it in the class of the pound sterling, US dollar, Japanese yen and the euro.
Jamaica's main imports partner remains the United States, from which 42 per cent of imports originate, but trade with China is on the increase.