Sharing insights elevates their impact (2023)

Sharing insights elevates their impact (1)

04 May 2022 Todd C. Lee

The weaponization of the US dollar against Russia after itsinvasion of Ukraine has raised expectations that Beijing willaccelerate its de-dollarization efforts, to protect against similarfinancial sanctions that Washington could deploy against China(mainland). While the Chinese renminbi (RMB) is unlikely todethrone the US dollar in the global financial system soon,concerns remain that the dollar's weaponization against Russia hasinitiated an irreversible fracturing of the global financial systemthat will result in two international monetary systems, one led bythe United States and one by China.

RMB internationalization and development as a reservecurrency

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The internationalization of the RMB and its potential emergenceas a major reserve currency are related but not equivalent. Theinternationalization of the RMB is intended to increase its usagein international trade and financial transactions, while itspossible ascension to a major global reserve currency entailsRMB-denominated financial assets being widely and heavily held incentral banks' foreign-exchange reserves.

RMB's advancements in the two areas have been marginal, evenwith Beijing's greater push on both fronts since the early2010s.

  • In foreign-exchange markets trading, the RMB accounted for 4.3%of one side of total trade in 2019, according to the Bank forInternational Settlements' triennial survey - up from 0.9% in 2010.The US dollar remained the most actively traded currency in theglobal forex market, accounting for 88.3% of all trades on one sidein 2019.
  • The reach of China's CIPS (Cross-Border Interbank PaymentSystem), the international payment system China launched in 2015,still pales in comparison with that of the cross-border financialmessaging platform SWIFT (the Society for Worldwide InterbankFinancial Telecommunication). At the end of March 2022, CIPS had1,304 participants, compared with more than 11,000 of SWIFT'sparticipating institutions. Moreover, more than 80% of CIPS'stransactions rely on SWIFT's messaging service.
  • As a reserve currency, the RMB accounted for only 2.8% offoreign-exchange reserves held by central banks across the globe inthe fourth quarter of 2021. The US dollar, on the other hand,remained the dominant global reserve currency, accounting for 58.8%of reserves held by central banks in the final quarter of2021.

Sharing insights elevates their impact (2)

Prospects and impact of China'sde-dollarization

Given the RMB remains far behind the US dollar in terms ofinternational use and the role of the dominant global reservecurrency, what countermeasures could Beijing deploy to protectChina against US financial sanctions like those enacted againstRussia?

Option 1: Diversifying away from US dollarreserves

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To protect against the US freezing China's foreign-exchangereserves, Beijing could aggressively diversify its reserve holdingsaway from US dollar-denominated assets. China reduced its holdingsof US dollar reserves from 79% of its total foreign-exchangereserves in 1995 to 59% in 2016 (the latest data reported byChina's State Administration of Foreign Exchange). This is far lessthan Russia's dollar-reserve diversification efforts, as theRussian central bank has reduced its holdings of dollar reserves toonly 7% of its overall foreign-exchange reserves. However, becausemost of Russia's reserve diversifications went to financial assetsof other advanced economies that are part of the US-led allianceagainst Moscow, more than half of Russia's foreign-exchangereserves were still frozen by the sanctions. Given the size anddepth of advanced economies' financial markets, if Beijing were todiversify its reserve holdings away from dollar assets, it wouldhave little choice but to reallocate its portfolio to the financialinstruments of the other advanced economies. Indeed, advancedeconomies account for 96% of the global bond market excluding theUS and China. (China cannot hold foreign-exchange reserves in RMBassets.)

Sharing insights elevates their impact (3)

Option 2: Full push for the RMB to achieve major globalreserve currency status

Beijing could launch a forceful push to promote the RMB as amajor global reserve currency. The key obstacle to this option isnot the US dollar's entrenched dominance in international trade andfinance that the RMB has struggled to chip away. Rather, theessential barrier to the RMB becoming a major global reservecurrency is the Chinese government's inability to fully liberalizeChina's capital account, owing to its underdeveloped andinsufficiently robust financial system. China's financial system isdominated by banks, which are mostly under state command. Giventhis, bank lending is not always based on commercial criteria andgenerally favors state-owned enterprises or politically connectedprivate firms. China's bond market lacks transparency becauseChina's subpar domestic credit rating industry has consistentlyprovided inflated ratings for Chinese bonds. China's stock marketsare highly volatile owing to poor corporate governance, inadequateaccounting practices, low auditing standards, and speculativeinvestments by retail investors. If Beijing fully liberalizesChina's capital account, allowing unfettered capital flows acrossthe country's borders, its less than fully healthy financialmarkets could induce debilitating capital flight during periods ofeconomic stress.

Option 3: Expedite the development of China's centralbank digital currency

Another potential option for China's de-dollarization is tofast-track the development of its central bank digital currency(CBDC). CBDC is fiat money issued by the central bank in digitalformat, which is widely available to the public. There are twotypes of CBDC: wholesale CBDC used by financial institutions, andretail CBDC used by households and businesses. Wholesale CBDC isalready in use, as they are financial institutions' deposits at thecentral bank (that is, reserves). As a result, launching CBDCeffectively means rolling out retail CBDC. The PBoC begandeveloping China's CBDC - known as e-CNY - in 2017. Regardless ofChina's progress in e-CNY's development, requirements for the RMBto become a major global reserve currency remain the same.Specifically, China still needs to clear the hurdle of capitalaccount liberalization. Furthermore, privacy will be a majorconcern for the internationalization of e-CNY despite the PBoC'sassurance of e-CNY's "controllable anonymity," given that theinstitutional limits on governmental executive power in China aremuch more blurred than in advanced economies.

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Prospects and impact of "shock and awe" financialsanctions against China

There are two major components of the US-led financial sanctionsagainst Russia: removing Russian banks from SWIFT, and freezing theRussian central bank's foreign-exchange reserves.

It would be nearly impossible to completely cut off China'sbanks from SWIFT. Even the sanctions against Russia only imposed apartial exclusion of Russian banks from the system, the reasonbeing Europe's heavy dependence on oil and natural gas imports fromRussia. The international payment system and international supplychains are two sides of the same coin: goods sold and boughtthrough the international supply chain are paid and paid forthrough the international payment system. Given that Europe isreluctant to completely cut off oil and natural gas imports fromRussia, it cannot completely cut off Russian banks from the paymentsystem.

China's entrenchment in the international supply chain dwarfsthat of Russia. China is the world's largest goods trader and isdeeply entrenched across a wide stretch of the global supply chain,while Russia is mainly a commodities exporter. Thus, completelycutting off China from the international payment system would sendcatastrophic shockwaves through the global economy, as it wouldeffectively entail a hard decoupling with China. As a result, onlythe most extreme geopolitical conflict between China and the UScould put this option on the table.

Freezing China's foreign-exchange reserves would be lesscatastrophic than completely removing China from the internationalpayment system, although the resulting shocks to the global economywould still be extreme given the country's immense size. FreezingChina's foreign-exchange holdings would severely impair the PBoC'sability to stabilize the RMB's exchange rate and fend off acurrency crisis. An RMB crash would inevitably ensue, leading to animport collapse. The Chinese authorities would be likely to imposestrict capital controls to stabilize the RMB. Foreign portfolioinvestment in China would be trapped, and multinational enterprisesoperating in China would be unable to repatriate theirearnings.

Final word

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Beijing's efforts toward RMB internationalization and reservecurrency promotion have been unable to shake the US dollar'sdominance in international finance and its role as the pre-eminentglobal reserve currency. China's under-developed and insufficientlyrobust financial system is the key technical obstacle to the RMBbecoming a major reserve currency. China's blurry institutionallimitations on governmental executive authority also pose a majorimpediment to the RMB's ascension to a major reserve currency.Ironically, the removal of these major barriers would imply aconvergence of China's economic and political system with that ofthe advanced economies, which would greatly reduce the risk of theUS-led shock-and-awe financial sanctions against China that Beijingis seeking to avoid.

Posted 04 May 2022 by Todd C. Lee, Chief China Economist, S&P Global Market Intelligence

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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FAQs

What is the importance of insights? ›

The purpose of insights is to connect head and heart knowledge—information plus inspiration. Too often, information just describes phenomena with no clear path of what to do with it. But the best insights reveal behaviors or phenomena and point to solutions or ideas.

How do I share insights? ›

Another way to share research and insights is by sharing with several people at the same time. This might be done using platforms like Google Drive and SharePoint, or via office messaging platforms like Slack or Microsoft Teams.

Why insights are important for businesses? ›

Consumer insight can provide a business with the opportunity to better personalize and tailor products to the needs, wants, and demands of their customers. Organizations that leverage their customer behavior to generate insights outperform their peers by 85% in sales growth, according to Microsoft.

Why actionable insights are important? ›

Actionable insights are meaningful findings that result from analyzing data. They make it clear what actions need to be taken or how one should think about an issue. Organizations use actionable insights to make data-informed decisions.

What does it mean to provide insights? ›

(the ability to have) a clear, deep, and sometimes sudden understanding of a complicated problem or situation: It was an interesting book, full of fascinating insights into human relationships. Synonym. understanding (KNOWLEDGE)

What does it mean to give your insights? ›

If you gain insight or an insight into a complex situation or problem, you gain an accurate and deep understanding of it.

What does share content to view insights mean? ›

Clicking on each post then tapping 'View Insights' will open the in-depth analytics. Under this section of Instagram Insights, you can see the total interactions from each post, the breakdown of the engagement, and also most interestingly, the breakdown of the discovery of your post.

How do I increase engage with insights? ›

7. Engage with insights. Start engaging by liking & commenting on content that your connections are sharing in your home feed. Do this on a daily basis to share your professional knowledge and prove you're a subject matter expert.

Why insight is important in communication? ›

There is no point doing any market research or analysis unless it persuades somebody in your organisation to do something. If our colleagues don't do anything as a result of our insight, then our customers will not behave differently either.

Why is insight important in leadership? ›

Assuming that the leader is willing to see with “new eyes.” This ability to “see inside” people and situations can solve challenging problems, uncover new opportunities, and avoid difficulties. And it helps engage good employees and others, and motivate organizations for success.

What are insights and how do they help businesses? ›

Consumer insights research involves analyzing data gathered during market research to make relevant and actionable business decisions. Market research collects data about the entire market, while consumer insights research uses that data to help you predict how consumers will react to your brand.

What are the key attributes to make an insight actionable? ›

The six attributes of actionable insights
  • Alignment.
  • Context.
  • Relevance.
  • Specificity.
  • Novelty.
  • Clarity.
12 Feb 2021

Why insights and analytics are important? ›

Data and analytics build off each other to deliver deep understanding, or insights, into your user base. Insights provide essential wisdom about your users and reveals actions you can take to improve your business. However, these insights cannot be obtained without analytics, and analytics is useless without data.

What is the difference between information and insight? ›

Information helps us to observe what is happening, while insights explain why. These business insights help to arrive at decisions and define strategy.

What is another word for giving insight? ›

Some common synonyms of insight are acumen, discernment, discrimination, penetration, and perception. While all these words mean "a power to see what is not evident to the average mind," insight suggests depth of discernment coupled with understanding sympathy.

How would you describe good insights? ›

showing or allowing great understanding: clear, considerable, deep, detailed, great, penetrating, perceptive, profound, real, remarkable, revealingHer article contains some profound insights.

What's another way to say provide insight? ›

What is another word for give insight?
shed light onexplain
revealclear up
make cleargive insight into
sort outstraighten out
cast light onedify
110 more rows

How do you say thank you for sharing insights? ›

Thank you so much for sharing your insight with me. I appreciate the way you support our team. You've always made it clear that you want what's best for our team, and I appreciate that. I'm grateful that you're always willing to answer my questions.

How do you use good insight in a sentence? ›

It is a fascinating book because it gives one a great insight into what is going on all over the world. We have had some interesting discussions, which show great insight and knowledge. That work has given me great insight.

How do you write an insightful reflection? ›

Tips For Good Reflective Writing

Avoid writing a summary of the material. This is a reflection paper, not an article summary. Pick out specific points from the text, quote them, and then analyze them with your own perception. Don't write out your life story when you're relating to a specific point.

How do you demonstrate insight? ›

Showing full insight means accepting responsibility for the full history, showing recognition of how it has impacted on colleagues, patients and others, and on the public's confidence in the profession.

Why is it important to share content? ›

When you share your content, you are increasing the likelihood that people will see it and engage with it. The more eyes on your content, the more opportunities you have to convert leads into customers. Below are just a few of the most important reasons why sharing your blog content is so important.

Why content sharing is important? ›

On social media and email

When you find an article, video or infographic that you just know your audience will love – share it. This will encourage conversations. It will also build important relationships between you and your audience as well as with other industry folks.

How important is it to share my content on social media? ›

Using social media together with your content marketing helps you gain and build links organically. As you build your social media following, you build up a large following of people that can share your content. Every piece of content that hits your website should immediately be shared on your social profiles.

How do you increase interactions? ›

Top 10 Tips to Gain More Post Interactions
  1. Images. Simply including an image in your post can increase the number of interactions you gain. ...
  2. Videos. Like images, videos have also been shown to increase interaction statistics. ...
  3. Use Emojis. ...
  4. Hashtags. ...
  5. #PowerOfPersonal. ...
  6. Contests. ...
  7. Engage Your Audience with Questions. ...
  8. Create Polls.
8 Sept 2020

Why is it important to increase engagement? ›

Having better social media engagement means your customers have a stronger relationship with your brand. This in turn provides you with more opportunities to build brand loyalty, increase word-of-mouth referrals and increase sales.

How can I increase my engagement with content? ›

8 Surefire Ways to Increase Content Engagement For Your Brand
  1. Create Controversy. ...
  2. Ask People to Share Thoughts and Opinions. ...
  3. Surprise the Audience. ...
  4. Create Interactive Content. ...
  5. Reward Engagement. ...
  6. Use Video. ...
  7. Mention People in Social Shares. ...
  8. Pay Attention to Timing.
18 Oct 2017

What does communicate insights mean? ›

Communicating insight is extracting insights and information from data and communicating them to decision-makers in a way they'll easily understand. It is as important as researching or analysing data.

What is the most essential feature of insights? ›

Having a well-crafted dilemma is essential to any insight statement, without it there is no problem to solve, and no unmet need calling for a solution.

What are key leadership insights? ›

7 Leadership Insights That Lead To Winning and Success In...
  • "Nice guys" don't necessarily finish last. ...
  • Success doesn't require disrespect or cruelty. ...
  • Meeting your goals is the only definition of success. ...
  • Success requires a clear, vivid, and explicit vision. ...
  • Winning means compromise and making tradeoffs.
26 Nov 2021

What are two benefits of using insights choose two? ›

Insights help you conveniently explore and analyze application data, such as company sales, bugs, and team assignments. You can use insights to retrieve specific data, and present the data as a list or an interactive chart.

What are four strategies for getting to insights? ›

Here are four steps you can take to find a genuine human insight and shape your audience strategy.
  • Step 1: Create an audience sample. ...
  • Step 2: Observe your audience. ...
  • Step 3: Find the tension. ...
  • Step 4: Create and test hypotheses.

What are the four types of insights? ›

Key takeaways:

There are four main consumer insights research types: primary, secondary, quantitative, and qualitative research. Depending on your goal, you can mix any of those research types to get the data you need to improve your business.

What are key sources of insight? ›

9 key insight categories in the client discovery process
  • Define client goals and objectives. ...
  • Review market characteristics and trends. ...
  • Digital analytics data including site analytics. ...
  • Content audit. ...
  • Competitor audit. ...
  • Customer / Stakeholder audit. ...
  • Influencers in the market. ...
  • Specific media and link audits.
22 Jun 2020

What are the insights and learnings? ›

Insight learning is a process that leads to a sudden realization regarding a problem. Often, the learner has tried to understand the problem, but steps away before the change in perception occurs. Insight learning is often compared to trial-and-error learning, but it's slightly different.

What helps to gain powerful insights about data? ›

Visual analysis allows you to get data, view the data, ask and answer questions, and repeat. Each time, your enquiry deepens along with your data insights.

What is an insight example? ›

Insight is a vision. A vivid example of insight is a familiar plot twist in cartoons when the character can't find a way out of the situation, but then a light bulb lights up above their head. It means that the character could develop a solution to catch insight and generate the right idea.

What is an actionable insight? ›

Actionable insights are conclusions drawn from data that can be turned directly into an action or a response. The data informing the insights can be structured or unstructured, quantitative or qualitative.

What is the difference between feedback and insight? ›

Insights are the competitive advantage, not feedback. Feedback can only be given in response to something you do, so it limits the context and your universe of potential insight.

Why is insight important in research? ›

Tracking actionable insights allows us to refer back to a particular research project, see what actions were identified as a result of the research findings, and determine what action was taken within the product since those actions were identified.

What is insight and how does it work? ›

Insight is the understanding of a specific cause and effect within a particular context. The term insight can have several related meanings: a piece of information. the act or result of understanding the inner nature of things or of seeing intuitively (called noesis in Greek)

Why is insight important for innovation? ›

The importance of insight for innovation

More broadly, the most successful innovations are built on robust and meaningful insights: Using insight to pinpoint the biggest commercial opportunities. This ensures innovations set-off in the right direction. And then repeated and iterative testing of product concepts.

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