Important obstacles still stand in the way of financial liberalization

China's increasing financial liberalization over the past two years appears to be paving the way for widespread international use of the renminbi, but major obstacles still stand in the way. We therefore believe that the day is still a long way off when traders need to quote renminbi prices for a significant part of their sales and purchases, especially outside East Asia.

Unlike currencies of other large economies - the US dollar, the euro and the yen - the renminbi has been conspicuously absent in international trade or financial transactions. In fact, the currencies of several markedly smaller economies, including those of Australia, Switzerland, and the UK, have achieved much greater prominence in international economic activities.