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International use of the renminbi for invoice currency and exchange risk management: Evidence from the Japanese firm-level data


  • Sato, Kiyotaka
  • Shimizu, Junko


The use of the Chinese renminbi (RMB) is said to have been increasing in recent years for trade invoicing, due to active promotion policies implemented by the Chinese government. However, only patchy information has been presented in the literature on the use of RMB in Chinese trade. Using the information obtained from two-round, large-scale questionnaire surveys, this paper presents new evidence on the use of RMB and exchange risk management by Japanese subsidiaries operating in China and other Asian countries. We find that Japanese subsidiaries in China mainly use the U.S. dollar, and to a lesser extent, the yen in trade with other countries. However, they increase the use of RMB in intra-firm trade with Japan. The result of Logit estimation indicates that RMB transactions will grow further if overseas subsidiaries have more discretion in exchange rate risk management. Removing capital controls on onshore RMB (CNY) market is another necessary condition to promote RMB internationalization.

Suggested Citation

  • Sato, Kiyotaka & Shimizu, Junko, 2018. "International use of the renminbi for invoice currency and exchange risk management: Evidence from the Japanese firm-level data," The North American Journal of Economics and Finance, Elsevier, vol. 46(C), pages 286-301.
  • Handle: RePEc:eee:ecofin:v:46:y:2018:i:c:p:286-301
    DOI: 10.1016/j.najef.2018.04.013

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    References listed on IDEAS

    1. Ito, Takatoshi, 2017. "A new financial order in Asia: Will a RMB bloc emerge?," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 232-257.
    2. Bacchetta, Philippe & van Wincoop, Eric, 2005. "A theory of the currency denomination of international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 295-319, December.
    3. Kiyotaka Sato, 1999. "The International Use of the Japanese Yen: The Case of Japan's Trade with East Asia," The World Economy, Wiley Blackwell, vol. 22(4), pages 547-584, June.
    4. Barry Eichengreen & Masahiro Kawai, 2014. "Issues for Renminbi Internationalization : An Overview," Finance Working Papers 23961, East Asian Bureau of Economic Research.
    5. Friberg, Richard, 1998. "In which currency should exporters set their prices?," Journal of International Economics, Elsevier, vol. 45(1), pages 59-76, June.
    6. Friberg, Richard & Wilander, Fredrik, 2008. "The currency denomination of exports -- A questionnaire study," Journal of International Economics, Elsevier, vol. 75(1), pages 54-69, May.
    7. ITO Takatoshi & KOIBUCHI Satoshi & SATO Kiyotaka & SHIMIZU Junko, 2015. "Choice of Invoice Currency in Global Production and Sales Networks: The case of Japanese overseas subsidiaries," Discussion papers 15080, Research Institute of Economy, Trade and Industry (RIETI).
    8. Ito, Takatoshi & Koibuchi, Satoshi & Sato, Kiyotaka & Shimizu, Junko, 2016. "Exchange rate exposure and risk management: The case of Japanese exporting firms," Journal of the Japanese and International Economies, Elsevier, vol. 41(C), pages 17-29.
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    Cited by:

    1. Fengming Qin & Junru Zhang & Zhaoyong Zhang, 2018. "RMB Exchange Rates and Volatility Spillover across Financial Markets in China and Japan," Risks, MDPI, Open Access Journal, vol. 6(4), pages 1-26, October.
    2. Benjamin KEDDAD & SATO Kiyotaka, 2019. "Pegging or Floating? A Regime-Switching Perspective of Asian Exchange Rate Practices," Discussion papers 19073, Research Institute of Economy, Trade and Industry (RIETI).
    3. Angella Faith LAPUKENI & SATO Kiyotaka, 2019. "Invoice Currency Choice in Malawi's Imports from Asia: Is there any evidence of Renminbi Internationalization?," Discussion papers 19060, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item


    Renminbi internationalization; Invoice currency; Overseas subsidiary; Intra-firm trade; Production network; Exchange risk management;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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