China’s growing economic weight in the world economy is the fundamental driver for RMB internationalisation. The rationale behind this includes the drawbacks of the current international monetary system, the benefits for Chinese enterprises and financial institutions, and the intention of inviting foreign pressure for domestic reform.
The use of the RMB began in cross-border trade and investment, and soon expanded to offshore markets and financial transactions. It has also become a foreign reserve currency held by some central banks. The RMB’s future depends on many conditions, including the pace of China’s capital opening, exchange rate flexibility, domestic financial market development and market acceptance.
KeywordsBilateral currency swaps Capital account openness China, currency convertibility Currency internationalisation Domestic financial market Exchange rate flexibility Foreign reserves International monetary system Offshore RMB markets RMB
JEL ClassificationsE52 O53
- Bénassy-Quéré, A., and J. Pisani-Ferry. 2011. What international monetary system for a fast-changing world economy? Presented at Asia-Europe Economic Forum, Paris, 10–11 January.Google Scholar
- Chinn, M., and J. Frankel. 2005. Will the euro eventually surpass the dollar as leading international reserve currency? NBER Working paper. No. 11510.Google Scholar
- Destais, C. 2012. China cannot achieve the internationalization of its currency without making it fully convertible. Money & Finance. CEPII.Google Scholar
- Eichengreen, B. 2011. Exorbitant privilege: The rise and fall of the dollar and the future of the international monetary system. Oxford: Oxford University Press.Google Scholar
- Frankel, J. 1999. No single currency regime is right for all countries or at all times. NBER Working paper series 7338.Google Scholar
- Gao, H. 2013b. The RMB internationalization, capital account opening and chinese domestic financial reform. Review of International Affairs LXIV(1152): 5–24.Google Scholar
- Gao, H., and U. Volz. 2012. Is China ready to open its capital account? 29 March. Available at http://www.eastasiaforum.org/2012/03/29/is-china-ready-to-open-its-capital-account/.Accessed 15 Aug 2016.
- Gao, H., and Y. Yu. 2012. Internationalization of the renminbi. BIS paper 61: 105–124.Google Scholar
- He, D., and R.N. McCauley. 2010. Offshore markets for the domestic currency: Monetary and financial stability issues. BIS Working papers. No. 320.Google Scholar
- Ito, T. 2011. The internationalization of the RMB: Opportunities and pitfalls. Prepared for symposium The future of the international monetary system and the role of the Renminbi. Organised by the Council on Foreign Relations and China Development Research Foundation.Google Scholar
- Kawai, M., and V. Pontines. 2014. The renminbi and exchange rate regimes in East Asia. ADBI Working paper No. 484.Google Scholar
- Kawai, M., and S. Tagaki. 2011. The RMB as a key international currency? lessons from the Japanese experience. Notes prepared for the Asia-Europe Economic Forum, Paris, 10–11 January.Google Scholar
- Kenen, P. 1983. The role of the dollar as an international currency. In Occasional Papers 13. New York: Group of Thirty.Google Scholar
- Kenen, P. 2012. Currency internationalization: An overview in currency internationalization: Lessons from the global financial crisis and prospects for the future in Asia and the Pacific. BIS Papers 61: 9–18.Google Scholar
- Krugman, P. 2009. China’s dollar trap. Available at: http://nytimes.com/2009/04/03/ opinion/03krugman.html. Accessed 15 Aug 2016.
- Li, D., and S. Liu. 2008. Dual advancement for RMB internationalization. China Finance 11: 1–16.Google Scholar
- McCauley, R. N. 2015. Capital flowed out of China through BIS reporting banks in Q1 2015. BIS Quarterly Review 28–9.Google Scholar
- McCauley, R. N., and C. Shu. 2016. Dollars and renminbi flowed out of China. BIS Quarterly Review 26–7.Google Scholar
- Michalopoulos, G. 2006. The internationalization of the euro: Trend, challenges and risks. In Global divergence in trade, money and policy, ed. A. Volbert and H. Kotz, 195–214. Cheltenham: Edward Elgar.Google Scholar
- Moss, F. 2012. The euro: Internationalized at birth. BIS Papers 61: 57–74.Google Scholar
- PBC Project Team. 2012. The basic conditions are mature for accelerating China’s capital account opening. China Securities Journal .Google Scholar
- PBC. 2009. Administrative rules on pilot program of renminbi settlement of cross-border rade transactions. Available at: http://www.pbc.gov.cn/english/130721/2884989/index.html. Accessed 15 Aug 2016.
- PBC. 2010. Supporting pilot program for RMB settlement of Cross-border trade transactions to facilitate trade and investment. Available at: http://www.pbc.gov.cn/english/130721/2849409/index.html. Accessed 15 Aug 2016.
- PBC. 2015. Milestone of RMB internalization: RMB Cross-border Inter-bank payment system starts operation. Available at: http://www.pbc.gov.cn/english/130721/2963649/index.html. Accessed 15 Aug 2016.
- PBC. 2016a. People’s bank of China announced to implement macro prudential management of Ccoss border financing nationwide. Available at: http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/3055696/index.html. Accessed 15 Aug 2016.
- PBC. 2016b. SDR-denominated foreign exchange reserve data released by the PBC. Available at: http://www.pbc.gov.cn/english/130721/3045077/index.html. Accessed 15 Aug 2016.
- Prasad, E., and L. Ye. 2012. The renminbi’s role in the global monetary system. IZA Discussion paper No. 6335.Google Scholar
- Qing, H., I. Korhonen, J. Guo, and F. Liu. 2015. The geographic distribution of international currencies and RMB internationalization. International Review of Economics and Finance 42(3): 442–458.Google Scholar
- Sheng, S. 2013. Why China needs to accelerate capital account openness. Financial News..Google Scholar
- Subacchi, P., and Huang, H. 2012. The connecting dots of China’s renminbi strategy: London and Hong Kong. Chatham House .Google Scholar
- Takagi, S. 2012. Internationalizing the Yen, 1984–2003: Unfinished agenda or mission impossible? BIS paper 61: 75–92.Google Scholar
- Yu, Y. 2011. Revisit of the road map of RMB internationalization. RCIF Policy Brief No. 2011.056.Google Scholar
- Yu, Y. 2014. How far can renminbi internationalization go? ADBI Working paper No. 461.Google Scholar
- Zhang, B., and Q. Xu. 2012. RMB internationalization under exchange rate and capital account control. International Economic Review 4: 63–76.Google Scholar
- Zhang, B. 2011a. RMB internationalization: Sequencing upside down. FTChinese, Financial Times.Google Scholar
- Zhang, M. 2011b. The RMB internationalization: Onshore and offshore market. RCIF Working paper No.2011W09.Google Scholar
- Zhou, X. 2009. Reform the international monetary system. BIS Review 41/2009.Google Scholar