How Far Can Renminbi Internationalization Go?
AbstractSince the formal launch of the renminbi trade settlement scheme in 2009, renminbi internationalization has made impressive inroads. The progress in renminbi trade settlement is especially impressive. However, Hong Kong, China’s offshore renminbi deposits failed to make significant progress as expected. The question of how far renminbi internationalization can go has become a common concern in the international financial community. This paper argues that the sheer size of the People’s Republic of China’s (PRC) trade and the convenience of using the renminbi for transaction settlements is one contributing factor, but that exchange rate arbitrage and interest rate arbitrage matter also. As well, a fundamental constraint for renminbi internationalization is the PRC’s capital controls. Before fully opening up its capital account and making the renminbi freely convertible, however, the PRC needs first to put its own house in order, most importantly making the renminbi exchange rate flexible. While the renminbi can and will become a major international currency eventually, the road to internationalization is bound to be long and bumpy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 461.
Length: 28 pages
Date of creation: 14 Feb 2014
Date of revision:
Contact details of provider:
Postal: Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku,, Tokyo 100-6008, Japan
Fax: (81-3) 3593-5571
Web page: http://www.adbi.org/
More information through EDIRC
renminbi; trade settlement; capital account liberalization; capital controls; store of value;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-21 (All new papers)
- NEP-INT-2014-02-21 (International Trade)
- NEP-MON-2014-02-21 (Monetary Economics)
- NEP-SEA-2014-02-21 (South East Asia)
- NEP-TRA-2014-02-21 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Linda S. Goldberg & Cedric Tille, 2005.
"Vehicle Currency Use in International Trade,"
NBER Working Papers
11127, National Bureau of Economic Research, Inc.
- Ostry, Jonathan D. & Ghosh, Atish R. & Chamon, Marcos & Qureshi, Mahvash S., 2012. "Tools for managing financial-stability risks from capital inflows," Journal of International Economics, Elsevier, vol. 88(2), pages 407-421.
- Grassman, Sven, 1973. "A fundamental symmetry in international payment patterns," Journal of International Economics, Elsevier, vol. 3(2), pages 105-116, May.
- Vicente Galbis, 1994. "Sequencing of Financial Sector Reforms: A Review," IMF Working Papers 94/101, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Hugh Davis).
If references are entirely missing, you can add them using this form.