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The Benefits and Costs of Renminbi Internationalization

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  • Liqing Zhang
  • Kunyu Tao

Abstract

Despite the increasing recognition that the renminbi (RMB) may eventually become a key global currency, several important questions remain to be answered. This paper analyzes the benefits and costs of the RMB becoming an international currency. The benefits include reduced exchange risk, promotion of the development of the financial market, and expansion of firms in the People’s Republic of China. The costs include general costs, which complicate monetary policy and exchange rate policy, and several transitional risks. We argue that the benefits of RMB internationalization should surpass its costs, particularly in the long run, and provide comprehensive policy choices for a sustainable process of RMB internationalization

Suggested Citation

  • Liqing Zhang & Kunyu Tao, 2014. "The Benefits and Costs of Renminbi Internationalization," Macroeconomics Working Papers 24164, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:macroe:24164
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    File URL: http://www.eaber.org/node/24164
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    Citations

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    Cited by:

    1. Zucker Marques, Marina, 2021. "Financial statecraft and transaction costs: The case of renminbi internationalization," Discussion Papers 2021/9, Free University Berlin, School of Business & Economics.
    2. Ding Chen & Umar Muhammad Gummi & Junping Wang, 2024. "Does Renminbi internationalization matter for petroleum security in China? Evidence from a disaggregate analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 961-974, January.
    3. SATO Kiyotaka & SHIMIZU Junko, 2016. "The International Use of the Renminbi: Evidence from Japanese firm-level data," Discussion papers 16033, Research Institute of Economy, Trade and Industry (RIETI).
    4. 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).
    5. Hyoung-kyu Chey & Yu Wai Vic Li, 2016. "Bringing the Central Bank into the Study of Currency Internationalization: Monetary Policy, Independence, and Internationalization," GRIPS Discussion Papers 15-23, National Graduate Institute for Policy Studies.

    More about this item

    Keywords

    RMB; renminbi internationalization; International currency; financial market; PRC; transitional risks;
    All these keywords.

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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