IDEAS home Printed from https://ideas.repec.org/a/eee/ememar/v28y2016icp221-238.html
   My bibliography  Save this article

The internationalisation of the RMB: New starts, jumps and tipping points

Author

Listed:
  • Batten, Jonathan A.
  • Szilagyi, Peter G.

Abstract

We investigate the process of currency internationalisation of the Chinese Renminbi (RMB). Aggregated cross-border data provided by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) allows better measurement of the role played by a currency in trade and settlement. RMB transactions are significant and increasing but remain concentrated in key financial centres. Analysis using an asset pricing framework shows that the footprint of Chinese corporations in international markets has at times been significant, with the size of these transactions prompting many to reassess the likely pace of RMB internationalisation and its usage as an alternate vehicle currency.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ememar:v:28:y:2016:i:c:p:221-238
    DOI: 10.1016/j.ememar.2016.02.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1566014116300711
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Krugman, Paul, 1980. "Vehicle Currencies and the Structure of International Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 513-526, August.
    2. Xiaoli Chen & Yin‐Wong Cheung, 2011. "Renminbi Going Global," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(2), pages 1-18, March.
    3. 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.
    4. He, Qing & Korhonen, Iikka & Guo, Junjie & Liu, Fangge, 2016. "The geographic distribution of international currencies and RMB internationalization," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 442-458.
    5. Alan M. Taylor, 2013. "The Future of International Liquidity and the Role of China," Journal of Applied Corporate Finance, Morgan Stanley, vol. 25(2), pages 86-94, June.
    6. Victor DeMiguel & Lorenzo Garlappi & Raman Uppal, 2009. "Optimal Versus Naive Diversification: How Inefficient is the 1-N Portfolio Strategy?," Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1915-1953, May.
    7. Goldberg, Linda S. & Tille, Cédric, 2008. "Vehicle currency use in international trade," Journal of International Economics, Elsevier, vol. 76(2), pages 177-192, December.
    8. Barry Eichengreen & Masahiro Kawai, 2014. "Issues for Renminbi Internationalization : An Overview," Finance Working Papers 23961, East Asian Bureau of Economic Research.
    9. Benjamin Cohen, 2012. "The Benefits and Costs of an International Currency: Getting the Calculus Right," Open Economies Review, Springer, vol. 23(1), pages 13-31, February.
    10. Haihong Gao, 2013. "Convertibility as a step for the RMB internationalization," Economic Change and Restructuring, Springer, vol. 46(1), pages 71-84, March.
    11. Menzie Chinn & Jeffrey A. Frankel, 2007. "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?," NBER Chapters,in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 283-338 National Bureau of Economic Research, Inc.
    12. Tsuchiya, Yoichi, 2016. "Asymmetric loss and rationality of Chinese renminbi forecasts: An implication for the trade between China and the US," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 116-127.
    13. Simon T Gray, 2011. "Central Bank Balances and Reserve Requirements," IMF Working Papers 11/36, International Monetary Fund.
    14. Chen-yuan Tung & Guo-chen Wang & Jason Yeh, 2012. "Renminbi Internationalization: Progress, Prospect and Comparison," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(5), pages 63-82, September.
    15. Zhang, Zhiwen & Makin, Anthony J. & Bai, Qinxian, 2016. "Yen internationalization and Japan's international reserves," Economic Modelling, Elsevier, vol. 52(PB), pages 452-466.
    16. He, Dong & Yu, Xiangrong, 2016. "Network effects in currency internationalisation: Insights from BIS triennial surveys and implications for the renminbi," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 203-229.
    17. Li, Hong, 2013. "Integration versus segmentation in China's stock market: An analysis of time-varying beta risks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 88-105.
    18. Faisal Ahmed & Shengzu Wang & Isabelle Mateos y Lago & Samar Maziad & Stephanie Segal & Pascal Farahmand & Udaibir S Das, 2011. "Internationalization of Emerging Market Currencies; A Balance Between Risks and Rewards," IMF Staff Discussion Notes 11/17, International Monetary Fund.
    19. Dong He & Paul Luk & Wenlang Zhang, 2016. "Internationalisation of the Renminbi as an Investing and a Funding Currency: Analytics and Prospects," Pacific Economic Review, Wiley Blackwell, vol. 21(3), pages 295-323, August.
    20. Robert N. McCauley, 2013. "Renminbi internationalisation and China’s financial development," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(2), pages 101-115, May.
    21. Zheng, Dazhi & Li, Huimin & Zhu, Xiaowei, 2015. "Herding behavior in institutional investors: Evidence from China’s stock market," Journal of Multinational Financial Management, Elsevier, vol. 32, pages 59-76.
    22. Shu, Chang & He, Dong & Cheng, Xiaoqiang, 2015. "One currency, two markets: the renminbi's growing influence in Asia-Pacific," China Economic Review, Elsevier, vol. 33(C), pages 163-178.
    23. Aravind Yelery, 2016. "China’s Bilateral Currency Swap Agreements," China Report, , vol. 52(2), pages 138-150, May.
    24. Guidi, Francesco & Savva, Christos S. & Ugur, Mehmet, 2016. "Dynamic co-movements and diversification benefits: The case of the Greater China region, the UK and the US equity markets," Journal of Multinational Financial Management, Elsevier, vol. 35(C), pages 59-78.
    25. McCauley, Robert N., 2015. "Does the US dollar confer an exorbitant privilege?," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 1-14.
    26. Damian Tobin, 2013. "Renminbi internationalisation: precedents and implications," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(2), pages 81-99, May.
    27. Ming Zhang, 2009. "China's New International Financial Strategy amid the Global Financial Crisis," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(5), pages 22-35.
    28. Oi, Hiroyuki & Otani, Akira & Shirota, Toyoichiro, 2004. "The Choice of Invoice Currency in International Trade: Implications for the Internationalization of the Yen," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 22(1), pages 27-63, March.
    29. Dong He & Robert N McCauley, 2012. "Eurodollar banking and currency internationalisation," BIS Quarterly Review, Bank for International Settlements, June.
    30. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    31. Jongkyou Jeon & Yonghyup Oh & Doo Yong Yang, 2006. "Financial Market Integration in East Asia: Regional or Global?," Asian Economic Papers, MIT Press, vol. 5(1), pages 73-89, Winter.
    32. Jing Chi & Ke Li & Martin Young, 2006. "Financial Integration In East Asian Equity Markets," Pacific Economic Review, Wiley Blackwell, vol. 11(4), pages 513-526, December.
    33. 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.
    34. Zhouying Gang & Chen Shiyuan, 2012. "A discussion on the development strategy of the Chinese debt market (Chinese version)," Working Papers 1219, BBVA Bank, Economic Research Department.
    35. Liu, Tengdong & Hammoudeh, Shawkat & Thompson, Mark A., 2013. "A momentum threshold model of stock prices and country risk ratings: Evidence from BRICS countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 99-112.
    36. Yung Chul Park & Chi-Young Song, 2011. "Renminbi Internationalization: Prospects and Implications for Economic Integration in East Asia," Asian Economic Papers, MIT Press, vol. 10(3), pages 42-72, Fall.
    37. AliciaGarcia-Herrero & Yingyi Tsai & Xia Le, 2012. "RMB Internationalization: What is in for Taiwan?," Working Papers 1206, BBVA Bank, Economic Research Department.
    38. Li Jing, 2007. "The Rise of the Renminbi in Asia: Cost-Benefit Analysis and Road Map," Chinese Economy, Taylor & Francis Journals, vol. 40(4), pages 29-43, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Tao & Wang, Xiaosong, 2016. "The Road to International Currency: Global Perspective and Chinese Experience," MPRA Paper 72877, University Library of Munich, Germany.
    2. repec:gam:jijfss:v:6:y:2018:i:2:p:35-:d:138061 is not listed on IDEAS
    3. Kunze, Frederik & Basse, Tobias & Wegener, Christoph & Spiwoks, Markus, 2018. "The emergence of the RMB: A "New Normal" for China's exchange rate system?," Center for European, Governance and Economic Development Research Discussion Papers 348, University of Goettingen, Department of Economics.

    More about this item

    Keywords

    Currency Internationalisation; Financial market development; Renminbi; RMB; Society for Worldwide Interbank Financial Telecommunications (SWIFT);

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ememar:v:28:y:2016:i:c:p:221-238. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/620356 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.