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Does RMB Internationalization Promote Cross-Border Trade?

Author

Listed:
  • Yang Jiao

    (School of Economics, Singapore Management University)

  • Ohyun Kwon

    (School of Economics, Drexel University)

  • Saiah Lee

    (Ulsan National Institute of Science and Technology (UNIST))

Abstract

We investigate the internationalization of Renminbi (IoR) since 2006 by examining its increased utilization among Korean exporters to China. Employing proprietary data from Korean customs, which includes detailed invoicing information, our analysis reveals that products invoiced, either fully or partially, in RMB have experienced more rapid export growth. Furthermore, firms adopting RMB invoicing also exhibit faster export growth to China after controlling for relevant observables. Our findings remain robust when employing an instrumental variable approach to address potential endogeneity concerns. With the help of a currency invoicing model that demonstrates different impact channels, we show that the increased trade volume is due to Chinese importers facing lower currency costs when purchasing RMB-invoiced products compared to USD-invoiced products.

Suggested Citation

  • Yang Jiao & Ohyun Kwon & Saiah Lee, 2025. "Does RMB Internationalization Promote Cross-Border Trade?," Working Papers 202521, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    • Handle: RePEc:drx:wpaper:202521
    as

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    File URL: https://www.lebow.drexel.edu/sites/default/files/2025-04/202521-cgpa-does-rmb-internationalization.pdf
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    References listed on IDEAS

    as
    1. Chung, Wanyu, 2016. "Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data," Journal of International Economics, Elsevier, vol. 99(C), pages 237-250.
    2. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    3. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2022. "Dominant Currencies: How Firms Choose Currency Invoicing and Why it Matters," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1435-1493.
    4. Mukhin, Dmitry, 2022. "An equilibrium model of the international price system," LSE Research Online Documents on Economics 112500, London School of Economics and Political Science, LSE Library.
    5. Crowley, M. A. & Han, L. & Son, M., 2020. "Dominant Currency Dynamics: Evidence on Dollar-invoicing from UK Exporters," Cambridge Working Papers in Economics 20113, Faculty of Economics, University of Cambridge.
    6. Dmitry Mukhin, 2022. "An Equilibrium Model of the International Price System," American Economic Review, American Economic Association, vol. 112(2), pages 650-688, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    RMB internalization; invoicing currency; international trade;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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