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RMB Internationalization and Its Implications for Financial and Monetary Cooperation in East Asia

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  • Yung Chul Park

Abstract

This paper emphasizes the importance of the denomination of financial assets rather than trade invoicing as a long‐term determinant of an international currency. China needs to liberalize and open its financial system and make the RMB fully convertible, and to adopt a more flexible exchange rate system to speed up its currency internationalization, for which China could follow either a global or regional approach. The global approach is a riskier and more unpredictable strategy because it would demand a scope and timeframe of financial liberalization that is likely to be beyond China's institutional capacity over the coming decade. There are two options that could be taken in following the regional approach. One is creating an ASEAN+New 3 (the Chinese Mainland, Hong Kong, and Taiwan) RMB bloc and the other is liberalizing China's financial industries and internationalizing the RMB by playing a leading role in East Asia's economic integration within the framework of ASEAN+3. This paper concludes that the latter is a more realistic and effective approach for China.

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  • Yung Chul Park, 2010. "RMB Internationalization and Its Implications for Financial and Monetary Cooperation in East Asia," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(2), pages 1-21, March.
    • Handle: RePEc:bla:chinae:v:18:y:2010:i:2:p:1-21
    DOI: 10.1111/j.1749-124X.2010.01186.x
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    4. Yung Chul Park, 2007. "Whither Financial and Monetary Integration in East Asia?," Asian Economic Papers, MIT Press, vol. 6(3), pages 95-128, Fall.
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    1. de Truchis, Gilles & Keddad, Benjamin, 2013. "Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 394-412.
    2. Dai, Meixing, 2011. "Motivations and strategies for a real revaluation of the Yuan," MPRA Paper 30440, University Library of Munich, Germany.
    3. Chee-Heong Quah & Patrick M. Crowley, 2012. "China and the Dollar: An Optimum Currency Area View," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(4), pages 391-411.
    4. Meixing Dai, 2013. "In search of an optimal strategy for yuan’s real revaluation," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(1), pages 29-46, February.
    5. repec:prg:jnlpep:v:2013:y:2013:i:4:id:431:p:391-411 is not listed on IDEAS
    6. Fan Zhang & Miaojie Yu & Jiantuo Yu & Yang Jin, 2017. "The Effect of RMB Internationalization on Belt and Road Initiative: Evidence from Bilateral Swap Agreements," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(12), pages 2845-2857, December.
    7. Benjamin Keddad, 2013. "Exchange rate coordination in Asia under regional currency basket systems," Economics Bulletin, AccessEcon, vol. 33(4), pages 2913-2929.
    8. Hyoung-kyu Chey, 2014. "A Demand-Side Analysis of Renminbi Internationalisation: The Renminbi in South Korea," GRIPS Discussion Papers 14-02, National Graduate Institute for Policy Studies.
    9. Yu, Yongding, 2012. "Revisiting the Internationalization of the Yuan," ADBI Working Papers 366, Asian Development Bank Institute.
    10. Keddad, Benjamin, 2019. "How do the Renminbi and other East Asian currencies co-move?," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 49-70.
    11. Benjamin Keddad, 2013. "Assessing Asian Exchange Rates Coordination under Regional Currency Basket System," AMSE Working Papers 1345, Aix-Marseille School of Economics, France, revised Sep 2013.
    12. Dufrénot, Gilles & Keddad, Benjamin, 2014. "Business cycles synchronization in East Asia: A Markov-switching approach," Economic Modelling, Elsevier, vol. 42(C), pages 186-197.
    13. Miaojie Yu, 2023. "Internationalisierung des RMB und Belt and Road Initiative," Springer Books, in: Handelskrieg und Handelsgespräche zwischen China und den USA, chapter 10, pages 157-173, Springer.
    14. Xiaoguang Wang, 2020. "Leadership-building dilemmas in emerging powers’ economic diplomacy: Russia’s energy diplomacy and China’s OBOR," Asia Europe Journal, Springer, vol. 18(1), pages 117-138, March.
    15. Stefan Angrick, 2018. "Structural conditions for currency internationalization: international finance and the survival constraint," Review of International Political Economy, Taylor & Francis Journals, vol. 25(5), pages 699-725, September.
    16. Batten, Jonathan A. & Szilagyi, Peter G., 2016. "The internationalisation of the RMB: New starts, jumps and tipping points," Emerging Markets Review, Elsevier, vol. 28(C), pages 221-238.
    17. Yuming Cui, 2013. "The internationalization of the RMB: where does the RMB currently stand in the process of internationalization," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 27(2), pages 68-85, November.
    18. Miaojie Yu, 2023. "Chinas Handelsentwicklung und die Gestaltung der Öffnungspolitik in den letzten vier Jahrzehnten," Springer Books, in: Handelskrieg und Handelsgespräche zwischen China und den USA, chapter 1, pages 3-22, Springer.
    19. Mohammed Ahmed, Abdullahi, 2019. "China’s Bilateral Currency Swap Agreement: Strategic Move to Foster Political and Financial Hegemony," MPRA Paper 109879, University Library of Munich, Germany, revised 08 Oct 2019.
    20. Lee, Il Houng & Park, Yung Chul, 2014. "Use of National Currencies for Trade Settlement in East Asia: A Proposal," ADBI Working Papers 474, Asian Development Bank Institute.
    21. Ho, Kin-Yip & Shi, Yanlin & Zhang, Zhaoyong, 2018. "Public information arrival, price discovery and dynamic correlations in the Chinese renminbi markets," The North American Journal of Economics and Finance, Elsevier, vol. 46(C), pages 168-186.
    22. Po Sheng Ko & Cheng Chung Wu & Ying Shih Mai & Zhongrong Xu, 2019. "A Study of RMB Internationalization Path Based on Border Area Perspective," Complexity, Hindawi, vol. 2019, pages 1-10, October.
    23. Hyoung-kyu Chey, 2015. "Renminbi in Ordinary Economies: A Demand-side Study of Currency Globalization," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(3), pages 1-21, May.
    24. Miaojie Yu, 2020. "China-US Trade War and Trade Talk," Springer Books, Springer, number 978-981-15-3785-1, June.

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