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Geographic Spread of Currency Trading: The Renminbi and Other Emerging Market Currencies

Author

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  • Yin‐Wong Cheung
  • Robert N McCauley
  • Chang Shu

Abstract

This paper studies the ongoing diffusion of renminbi (RMB) trading across the globe, the first of such research of an international currency. It analyses the distribution in offshore RMB trading in 2013 and 2016 using comprehensive data from the Triennial Central Bank Survey of foreign exchange markets. In 2013, Asian centers favored by the policy of RMB internationalization had disproportionate shares in global RMB trading. Over the following three years, RMB trading seemed to converge to the spatial pattern of all currencies, with a half‐life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall, the RMB's internationalization is tracing an arc from the influence of administrative measures to the working of market forces.

Suggested Citation

  • Yin‐Wong Cheung & Robert N McCauley & Chang Shu, 2019. "Geographic Spread of Currency Trading: The Renminbi and Other Emerging Market Currencies," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(5), pages 25-36, September.
    • Handle: RePEc:bla:chinae:v:27:y:2019:i:5:p:25-36
    DOI: 10.1111/cwe.12292
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    Citations

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    Cited by:

    1. Cheung, Yin-Wong & Grimm, Louisa & Westermann, Frank, 2021. "The evolution of offshore renminbi trading: 2016 to 2019," Journal of International Money and Finance, Elsevier, vol. 113(C).
    2. Yin-Wong Cheung, 2023. "A decade of RMB internationalisation," Economic and Political Studies, Taylor & Francis Journals, vol. 11(1), pages 47-74, January.
    3. Cerutti, Eugenio & Casanova, Catherine & Pradhan, Swapan-Kumar, 2023. "Banking across borders: Are Chinese banks different?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    4. Arslanalp, Serkan & Eichengreen, Barry & Simpson-Bell, Chima, 2022. "The stealth erosion of dollar dominance and the rise of nontraditional reserve currencies," Journal of International Economics, Elsevier, vol. 138(C).
    5. Frank Westermann, 2023. "On the Geographical Dispersion of Euro Currency Trading: An Analysis of the First 20 Years and a Comparison to the RMB," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(2), pages 263-287, June.
    6. Haihong Gao & Yingting Li, 2020. "The Renminbi as a Trading Currency: Evidence from Selected Countries Participating in the Belt and Road Initiative," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(5), pages 45-63, September.
    7. Marina Zucker‐Marques & Pedro Perfeito da Silva, 2022. "The Role of Institutions: A Cross‐country Analysis of Renminbi Trading in Foreign Exchange Markets," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(3), pages 42-74, May.
    8. Kerry Liu, 2020. "Hong Kong: Inevitably irrelevant to China?," Economic Affairs, Wiley Blackwell, vol. 40(1), pages 2-23, February.
    9. Robert N McCauley & Catherine R Schenk, 2020. "Central bank swaps then and now: swaps and dollar liquidity in the 1960s," BIS Working Papers 851, Bank for International Settlements.
    10. Andreas Schrimpf & Vladyslav Sushko, 2019. "Sizing up global foreign exchange markets," BIS Quarterly Review, Bank for International Settlements, December.

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