In addition, pilot arrangements were introduced allowing offshore entities to use RMB to invest in the interbank bond market and the Mainland stock market.   A longer-term factor is China’s 12th Five-Year Plan, which was released in March last year. The Plan made clear that the wider use of RMB in cross-border transactions will be promoted as a matter of national policy. Where we are now? Taken together, those steps mean that the use of RMB for trade is today largely liberalised. Let me just illustrate that with a few figures:   In 2011, some RMB 2 trillion yuan, or 8% of the Mainland’s external trade and current account transactions, were settled in RMB.   The use of RMB for direct investments has also seen an encouraging start, amounting to some RMB 90 billion yuan for inward direct investments and RMB 20 billion yuan for outward direct investments in 2011.   As for portfolio investments, some 40 offshore institutions have been allowed to invest in the interbank bond market, within varying quotas. Meanwhile, some RMB 20 billion yuan have been invested in the stock market through the RMB Qualified Foreign Institutional Investor (QFII) scheme. As of course you know, over this period of liberalisation, a rapidly growing offshore RMB market has also emerged, centred in Hong Kong. The rising level of RMB trade flows to and from the Mainland has produced an expanding pool of RMB liquidity.
As a central bank governor, I would certainly welcome such a development. After all, the credibility of our monetary policy ultimately depends on whether the public believes that we match our words with our actions. BIS Review 55/2006  3