The prospects of chinas yuan as the next global currency. Critical analysis of rmb internationalization and the coming global currency shift renminbi rising charts the emergence of chinas internationalizing currency and provides an indepth analysis of the global repercussions. However, in terms of the currency internationalization prospect index cipi, the rmb has remained the worlds fifth highest since 2006. Rmb clearing services in london via a booktransfer model. Chinas internationalization of rmb aims to facilitate the reduction of transaction costs of international trade, reduce exchange rate risks, and increase the number of financial transactions. For both the chinese domestic economy and the global economy, the internationalization of the chinese renmenbi rmb will have a profound impact on the growth of future financial markets and their governance. The iso code for the renminbi is cny, an abbreviation of chinese yuan as it is often referred to in international finance. A progress report wells fargo securities may 22, 2018 economics group 2 has had little practical importance for the chinese currency, it has conferred a degree of legitimacy on the rmb by including it in the same exclusive club as the worlds mostused currencies. Renminbi rmb internationalisation survey to gain a better understanding of what company attitudes and outlooks are toward using the currency for crossborder transactions. Economists have long considered the international use of a currency as a market outcome that is subject to inertia as a result of network externalities i use it because others use it.
Moreover, rmb internationalization has already influenced the chinese economy and other emerging market economies. Table 2 provides a brief summary of current international regional use of the renminbi, in line with the general roles of an international currency indicated in table 1. Instead of focusing on the pbocs negotiation of the impossible trinity of flexible exchange rates, capital mobility and independent monetary policy, the paper highlights the challenges the pboc faces as it. Internationalisation of the renminbi bank for international settlements. Since the late2000s, the peoples republic of china prc has sought to internationalize its. Oct 08, 2014 rmb internationalization has achieved significant progresses in the past five years. Hong kong markets that trade renminbi at free floating rates use the unofficial code cnh. The internationlization of the renminbi 1st edition.
The inclusion of rmb in the imfs sdr basket is considered a significant milestone towards the integration of the chinese economy into the global financial system. The longterm game chinas longterm ambition for the rmb is clear. A snapshot of renminbi internationalization trends under. The book introduces an index of internationalization of renminbi. From the end of last year 2017, things have changed. This twoday conference brought together leading policy experts and economists from china, hong kong, asia, and the u. Irntnte a ionalization k achengreen editors w a m renminbi. While the development of the use of the chinese currency in international trade and finance has been ongoing for many years, the topic is very timely. In this regard, the chinese policy of renminbi internationalization 1 might not only be in the chinese interest see cheung et al. Renminbi internationalization asian development bank. Progress to date as chinas current account surplus and foreign exchange reserves began to surge in the mid 2000s and appreciation pressures on the renminbi intensified, controlled capital account liberalization started to gain importance on the policy. The influences of rmb internationalization on the chinese economy. The internationalization of the renminbi by ronald w anderson november 20, 2015 my subject is the internationalization of the renminbi rmb.
Following the global financial crisis of 2008, chinas major monetary policy objective is the internationalization of the renminbi, that is, to create an international role for its currency akin to the international role currently played by the u. Internationalization of the renminbi is an integral part of that ambition. In this second installment, he and wendy guo, cfa, discuss the possible influence that the renminbi qualified foreign. Feb 17, 2020 while the current trade war has not yet contaminated the monetary field, since flows of financial investment have not materially changed as of the first half of 2019, the risk remains of competitive devaluations aimed at boosting sagging economies on both sides of the pacific as well as global trade. China has designed an rmb based trade policy, via bilateral swap agreements, to spread the international use of the rmb.
It shows that the renminbi is a currency playing neither the role of a store of value nor that of an anchor for public purposes. Pakistan to use more rmb in the gwadar free zone to avoid exchange rate risk while it induces more. The internationlization of the renminbi 1st edition internationa. Renminbi internationalisation and chinas financial. Internationalization of the renminbi and its implications. We hope you glean much from this 2016 edition of our rmb internationalisation study and that whatever. Scholars who mentioned 2009 as the initial year of renminbi internationalization began tended to use the 2008 global financial crisis as a turning point for chinas policy changes. The internationalization of renminbi rmb is one of chinas most important national. This book aims to document the process and the development of the internationalization of renminbi and to identify the challenges. The impact of the renminbi internationalization on the global monetary order1 katarzyna twarowska maria curiesklodowska university in lublin, poland abstract background and the purpose.
Renminbi rising charts the emergence of chinas internationalizing currency and provides an indepth analysis of the global repercussions. This is to distinguish the rates from those fixed by chinese central banks on the mainland. As of enddec 2017, rmb is the 5th most active currency for international payments 4, up from 20th at 20125. The internationalization of the renminbi and the evolution of. This decision helps place the rmb alongwith the us dollar, euro and others. Trends and implications in the internationalisation of the. Renminbi internationalization is a hot topic, for good reason. The variation in the mention about the initial year of renminbi internationalization is caused by interpretation differences of renminbi internationalization. Latin americas role in renminbi internationalization. A snapshot of renminbi internationalization trends under one. The rmb can flow freely between free trade accounts fta, nonresident onshore accounts and offshore accounts. The timing, path, and strategies of rmb internationalization by a study group set up by the peoples bank of china pboc, chinas central bank pboc study group 2006. The internationalization of renminbi rmb is one of chinas most important national strategies in the 21st century and is symbolic in the rise of china.
This paper provides an overview of the potential international role of the renminbi rmb. This paper summarizes the developments of rmb internationalization. The internationalization of the renminbi and the evolution. More risks linked to the offshore renminbi market, which may transfer. Internationalization of the renminbi and its implications for. With the proposal of the belt and road initiative, many scholars have started to study the issue of rmb internationalization based on it. It illustrates chinas expanding role in global trade, facilitates the use of rmb in international trade and business, as well as reinforces the internationalization of rmb. So too is the role of rmb internationalization in the process of the prcs economic growth and development. Role in renminbi internationalization jahangir aziz1 internationalization of the renminbi. This paper explores the evolution of monetary policy in the context of the distinct path china and the pboc have adopted in fostering the international role of the renminbi. Indeed, international use of the rmb is an important element of chinas current reform strategy.
Establishing offshore rmb markets with the help of government policy is crucial to international rmb usage. Will chinas push to internationalize the renminbi succeed. Chen siqing put forward the new main line of pushing forward rmb internationalization further, namely, enterprise going global and outputting rmb capital 23. Chinas renminbi rmb is one of many currencies traded by banks and other institutions within the global foreign exchange forex market. The renminbi s dollar peg at the crossroads, center for international and development economics research, working paper series qt7tw4142j, center for international and development economics research, institute for business and economic research, uc berkeley. This study analyzes how renminbi rmb internationalization policies affect rmb exchange rates between 2010 and 2016 using the var vector autoregressive model. The chinese economy is the fastest growing and changing economy in the modern world. We argue that renminbi internationalization should be seen as a response to crises, first the asian financial crisis and then the global financial crisis. Internationalization of the renminbi 21st century china. Path selection of renminbi rmb internationalization. The importance of the renminbi as an international. It is, essentially, a window onto the chinese governments aspirations and the larger process of. For the rmb to internationalize, the best practices in rmb processing need to.
Critical analysis of rmb internationalization and the coming global currency shift. There is still a large gap between the potential and actual use of rmb outside of china, despite dramatic increases in rmb bank deposits, rmb denominated bonds issued, the percentage of chinas trade settled in rmb, and the foreign exchange turnover share of the rmb. A study of the internationalization of the chinese renminbi. Unlimited viewing of the articlechapter pdf and any associated supplements and figures. The chinese renminbi rmb is currently the fifth most common currency in global usage, according to swift, with the growth of usage expected to continue. Rmb, currency internationalization, rmb internationalization, monetary policy, international trade. Jun 22, 2015 in 20, the pboc allowed companies registered in the shanghai free trade zone sftz to remit working funds across the border and thus extend rmb intercompany loans to their offshore parent companies, subsidiaries, or affiliates. Chinas pursuit of renminbi internationalization has followed two interrelated tracks to date. Internationalization of the renminbi centre for international. The results show that many rmb internationalization policies have distinct impacts on the central parity rate, onshore exchange rate, and offshore exchange rate. Path selection of renminbi rmb internationalization under. Some will say that the cause of rmb internationalization is being advanced mainly in the interest of financial institutions, which see scope for doing international business in the currency as a lucrative source of potential income. The crossborder use of renminbi has been expanded, and new progress has been made in the internationalization of renminbi.
In the long term, the currencys internationalization is not only likely but also desirable for china and for the rest of the world. China, the worlds second largest economy as well as the largest trading nation, is continuing to internationalize the chinese yuan or renminbi rmb with its global trade and economic reform activities. The prcs strategy of rmb internationalization is sometimes characterized as a two. Furthermore, as china continues increasing its share of the worlds gdp, it. Among other issues, this brings into question the prospects of ambitious plans laid. Written by a team of renown economics researchers, this book describes the pressures that enabled the emergence of a new global monetary system and why chinas renminbi rmb. Prince christian cruz, yuning gao and lei lei song. The benefits and costs of renminbi internationalization econstor.
To achieve this objective, they have also declared that they want to develop shanghai as an international financial centre that can compete with. Rmb internationalization, crossborder trade settlement, capital. Although it is still far behind the us dollar and the euro, surpassing the ranking of the yen and the pound is possible in the near future. Aug 16, 2020 in addition, the possibility to leverage the extended crossborder international network of the american express cards around the world, that just in the united states make up nearly a quarter of all credit card transactions, is going to serve as a springboard for the further utilization of the chinese yuan wellbeyond the belt and road initiative bri boundaries and in this way to help to. Reviewing the current state, the paper finds that much progress has been made on rmb settlements for trade involving the peoples republic of china prc and on rmb denominated bond issuance in hong kong, china, but that rmb internationalization is still limited due to capital account controls. The benefits and costs of renminbi internationalization. Actually, zhang points out that the rmb exchange rate mechanism entered the era of free floating during a short period after the 811 reform. There are several factors that promote renminbi internationalization in the long term. Although the renminbi rmb is currently far from being an international currency, its position internationally is steadily using. Global financial markets can be unforgiving to freefloating currencies in times of crisis, as south korea has learned the hard way. We argue that renminbi internationalization should be seen as a response to crises, first the asian financial crisis and then. In 2009, it was ranked 18th among all important international currencies. Download free adobe acrobat reader dc software for your windows, mac os and android devices to view, print, and comment on pdf documents. Rqfii programs, and the opening of free trade zones ftzs shanghai for.
Pdf p the main objective of this paper is to analyze the internationalization of rmb. As such, we argue that current internationalization has been driven by short. Following the global financial crisis of 2008, chinas major monetary policy objective is the internationalization of the renminbi, that is, to create an international role for its currency akin to the international role. A study of the internationalization of the chinese. Freetrade zone and other freetrade zones might create more loopholes for. Rmb adoption has grown steadily over the years driven by a. Pdf we investigate the possibility of the chinese currency, renminbi rmb, becoming a dominant international currency. Renminbi internationalisation and chinas financial development. The sdr is an international reserve asset, created by the imf in 1969 to supplement its member countries official reserves. But rmb internationalization is not without great risks, kyungsoo kim points out. The internationalization of the chinese rmb renmenbi. Its implications for chinas domestic reform and the international system. Nov 19, 2019 chinas dramatic growth in international trade has made it the second largest economy in the world, as well as the largest exporter. Since february 2014 firms registered in the shanghai free trade zone have been allowed onshoreoffshore rmb and u.
Council on foreign relations press link to download paper at. Feb 28, 2012 in the first part of this interview, tse yung hoi, deputy chief executive officer of bank of china international holdings, discussed the basic concepts, background, and key milestones of renminbi rmb internationalization. This dependency on these two foreign currencies has stirred interest in promoting to a greater degree the internationalization of the rmb or an alternative international currency. The internationlization of the renminbi book cover.
1387 1181 524 907 340 523 1089 394 1184 145 793 641 931 596 679 203 609 431 428 1483 1014