Big steps must follow small advances

The BOC Cross-Border RMB Index launched by the Bank of China in Singapore last month is a big step in China's efforts to internationalize the yuan, as it is the first index on the currency's internationalization compiled and maintained by a Chinese financial institution.

According to officials, the index will help track cross-border yuan flows and transactions over time and across different regions. In particular, the gauge will follow the fluctuations in the amount of cross-border yuan flows, including yuan flow into and out of China, and cross-border transactions outside China.

The Bank of China says the index climbed to 186 in the second quarter of this year, registering an increase of 41 percent from the second quarter of last year, and an 86 percent increase over the fourth quarter of 2011, when the index started. Despite the index's rapid growth in the past couple of years, such a trend has come to a halt this year. As a matter of fact, the index has dropped slightly from the first quarter of this year, which is partly reflected in the capital outflows in response to the tapering off of the US Federal Reserve's asset purchase (quantitative easing) programs.