The impact of the Chinese economy on Asia has been significant, with many countries now counting China as their largest trading partner, and in some cases, among the largest foreign investors, Bank Negara Malaysia governor Zeti Akhtar Aziz says.

Reflective of the underlying fundamental economic changes, the rise of the renminbi, although gradual, is inevitable, with important implications not only to Asia but to the rest of the world.

Zeti said undoubtedly, the renminbi was more important to Asia than anywhere else.

"Given this, Asia, including Malaysia, must be ready for the increased internationalisation of the renminbi and its potential role in Asia's integration path and thus contributing towards further unlocking of the potentials of the region," Zeti ( photo ) told the HSBC Renminbi Forum in Kualka Lumpur today.

She said Bank Negara would further enhance its financial cooperation with the People's Bank of China in the area of Renminbi Qualified Foreign Institutional Investor to provide an alternative avenue for Malaysian investors to invest in onshore Chinese financial markets.

Investment in renminbi significantly lowered costs

Zeti said the settlement of trade and investment in renminbi significantly lowered costs and promoted greater cross-border trade and investment activity.

"Malaysian institutions and corporations such as Khazanah, Cagamas, Axiata and Maybank have issued renminbi bonds.

"With the various renminbi financial infrastructures that have been put in place to support trade, investment and financial flows between Malaysia and China, this trend is expected to increase," she said.

To-date, the usage of renminbi in Malaysia has grown rapidly, with the daily size of renminbi foreign exchange volume at 6.7 billion renminbi.

Zeti urged Malaysian entities with large regional networks to consider using Malaysia as the centre for their regional renminbi transactions and thus help to contribute towards greater economies of scale over time.

This would in turn enable the transactions to be conducted in the most efficient and cost-effective way, she said.

"More renminbi-based trade within the region will create pools of renminbi liquidity, which would create a demand for instruments.

"(This) would in turn, spur the development of more efficient and integrated renminbi capital markets in the region that can contribute towards better intermediation between the surplus and deficit units in the region," Zeti added.

- Bernama