The Chinese yuan CNY is a well known non-convertible currency. The Chinese authorities do not allow convertibility, in part, as a means to facilitate the managed exchange rate of the yuan the currency peg.
Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by clicking here. Please read the prospectus carefully. Shanghai is becoming a risk management center for RMB assets. Investors who invest in RMB assets will carry out continuous risk diversification and management. The various elements of risk management in Shanghai are gradually improving, Yi said.
As long as the regulatory requirements on anti-money laundering, anti-terrorist financing, and anti-tax evasion are met, the funds required for normal trade and investment can freely flow in and out of the city, Yi added. Qu said Shanghai can be a template in this regard. It would be easier for the rest of the country to practice the trail after learning from the experience of Shanghai.
Jimmy Zhu, chief strategist at Fullerton Research, said the current situation is conducive to promoting the internationalization of the RMB as China has done a good job in regards to pandemic control. But currently, it is favorable for China to push for the internationalization of the RMB as it has achieved good results in the pandemic control and prevention, Zhu said.
Capital market pricing is paying more attention to the factors related to the pandemic, so RMB assets are seeing high demand from foreign investors, compared with other assets.
The internationalization of the RMB is expected to see major progress in the next two to three years, Zhu said. Items include, for example, contributions to the share capital of Foreign Funded Enterprises and also foreign exchange loans. The procedures on foreign exchange, especially that related to current account items, have been relaxed in the last several years. One reason that a nation may choose to make its currency into a non-convertible currency is to prevent a flight of capital to offshore destinations.
Offshore investors who seek to engage in trade with nations that have non-convertible currencies must use a financial instrument known as a non-deliverable forward NDF. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. What Is Currency Convertibility? Currency convertibility is the degree to which a country's domestic money can be converted into another currency or gold. Convertible Currency A convertible currency is one that is freely traded and trusted by central banks and corporations.
Blocked Currency A blocked currency is one which can not be traded on the forex FX market, usually due to government restrictions.
Gold Standard The gold standard is a system in which a country's government allows its currency to be freely converted into fixed amounts of gold.
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