The internationalisation of the Chinese RMB will be of most benefit to countries that get on the front foot and develop their financial capabilities, says BNP Paribas.
Higher growth and better opportunities mean that more Australian capital will “gravitate” towards China and Asia, said BNP Paribas in a statement.
A recent agreement between China and Australia has resulted in the full convertibility of the AUD and RMB – and BNP Paribas expects the RMB to expand until it is one of the three major global currencies.
“Given Australia’s strong expertise in managing infrastructure investments, it could build a healthy business in managing Chinese portfolio investments in RMB."
Moreover, BNP Paribas believes that Australia’s superannuation industry is becoming over-capitalised and will need to allocate more capital abroad.
“Australia is becoming over-capitalised on account of the growth of its superannuation industry – or in other words it is gradually coming to a stage of having more money than investment opportunities within Australia – and therefore will need to increasingly deploy capital abroad for risk as well as return diversification,” the statement said.
“As China continues to grow, countries that set up the necessary financial capabilities are the most likely to benefit from ‘first mover advantages’ of RMB internationalisation,” BNP Paribas said.
“While those who do not invest in deepening financial connectivity with China will not only overlook a growth opportunity, but stand to lose out as capital flows from trade and investment move elsewhere.”