The "alliance" between the renminbi and the euro, the second largest reserve currency as well as the second most-traded currency in the world after the US dollar, demonstrates the increasing status of the renminbi and China's quickening step in internationalizing its currency.
So far China has signed currency swap deals totaling 2.2 trillion yuan with 22 countries and regions, and the renminbi has been among the top ten most-traded currencies across the world.
More importantly, the deal has sent a strong signal to the world that Europe is fully confident in China's economy, despite the cliche downbeat tone of previous reports by some Western media outlets.
The confidence lies in the burgeoning Chinese economy. Chinese President Xi Jinping spoke at the recent APEC summit on the topic, saying that "an annual speed of seven percent is enough to realize China's goal of doubling gross domestic product and income per capita between 2010 and 2020."
In addition, the recently inaugurated Shanghai free trade zone is set to bring more impetus to the Chinese economy.
Furthermore, the "alliance" between the renminbi and the euro is a win-win deal as it facilitates trade and investment and reduces risks for both sides. Several European cities are currently competing for Europe's offshore trading center for the renminbi, so the swap deal could be regarded as a vital step EU countries are taking to suit their strategy.
There is no denying that the internationalization of the renminbi still has a long way to go, and swap deals can not challenge the status quo of the international monetary framework with US dollar at the core.
However, we believe that the renminbi will play a more and more important role in stabilizing the international financial system, as well as diversifying the international monetary system at large.