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The weakening of the RMB in the past few weeks poses concern over the outlook of the currency on the back of rising US interest rate and weakening domestic demand due to COVID lockdowns. However, that does not prevent China from deepening the agenda of RMB internationalization. Our Chief China economist, Chris Leung, argues China need not follow a conventional path. Instead, China should build an alternative RMB system co-existing with the present USD based system.
In order to achieve this grand plan, China will have to leverage on three anchoring pillars: (1) Petro-CNY, (2) Renewable Energy-CNY and (3) RCEP-CNY. In short, I call this the PRET anchoring system. P stands for Petro, RE for Renewable Energy and T for trade within RCEP.
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