A reserve currency is not created overnight, if at all. And China’s renminbi won’t be claiming an exclusive title any time soon.

That is the message of a report by law firm Allen & Overy which looks at the funding needs of global companies over the next decade. It finds that, although the renminbi might make strides against the euro and the dollar, there is no easy path to currency domination.

The A&O report asked 1,054 executives globally where they thought the RMB would be in 10 years time. As their chart shows, there is no expectation of a quick march by the RMB into the world’s reserve currency position – rather it points to a multi-polar world with multiple currencies sharing the responsibilities and benefits of reserve status:

When asked, ‘what do you think will be the most important currency for international trade and finance in 2020?’, only 11 per cent chose the RMB. That compares with 55 per cent for the dollar and 21 per cent for the euro. However, the simple fact that the RMB registered in the top three at all says quite alot about how far it has come over the past few years.

There are no exact figures available for the percentage of RMB holdings as foreign reserves worldwide. But anecdotal evidence suggests that the redback is on the rise as countries look to hedge against dollar and euro vulnerability. It is just that vulnerability which is driving China to promote the RMB as a reserve. China holds such a large stock of dollars that it is especially vulnerable to any devaluation – whether inflation led or otherwise – and cannot sell any large quantities without adversely affecting the market price.

Another indication of the RMB’s rise can be found by looking at the growing trend towards RMB-denominated products – exemplified by fact that the RMB was a more popular currency for company bond sales than the euro for the first time in the third quarter of this year.

And as A&O’s charts show, there is an increase in the expected use of RMB products over the next five years:

Only 17 per cent of those surveyed by A&O expected to use renminbi denominated products for any of their financing needs in the next year. However, that number increases by half to 26 per cent when executives were asked whether they expected to use renminbi denominated products for financing over the next five years.

That increasing use of renminbi denominated products, dim-sum bonds and RMB priced gold for example, points to the development of a market to rival the usual funding channels from the US and Europe – this trend will only grow as multinationals operating in China, and using the RMB, look for ways to hedge within the currency. As A&O’s report notes the biggest issue for companies will be the repatriation of proceeds:

"But there is increasing clarity as to how this process works and the issue will fade away once the renminbi is fully convertible, expected to happen sooner than many think. It is in China’s interest to have the currency freely convertible and therefore allow it to play a bigger role internationally. The key consideration will be to ensure that the pace of convertibility reform does not disrupt the real economy and stability of the currency."