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The Renminbi Bloc is Here: Asia Down, Rest of the World to Go?


  • Arvind Subramanian

    () (Peterson Institute for International Economics)

  • Martin Kessler

    () (Peterson Institute for International Economics)


A country’s rise to economic dominance tends to be accompanied by its currency becoming a reference point, with other currencies tracking it implicitly or explicitly. For a sample comprising emerging-market economies, we show that in the last three years, the renminbi (RMB) has increasingly become a reference currency, which we define as one that exhibits a high degree of co-movement with other currencies. In East Asia, there is already a RMB bloc, because the RMB has become the dominant reference currency, eclipsing the US dollar, which is a historic development. In this region, 7 currencies out of 10 co-move more closely with the RMB than with the dollar, with the average value of the co-movement coefficient relative to the RMB being about 60 percent greater than that for the dollar. We find that co-movements with a reference currency, especially for the RMB, are associated with trade integration. We draw some lessons for the prospects for the RMB bloc to move beyond Asia based on a comparison of the RMB’s situation today and that of the Japanese yen in the early 1990s. If trade were the sole driver, a more global RMB bloc could emerge by the mid-2030s, but complementary reforms of the financial and external sectors could considerably expedite the process.

Suggested Citation

  • Arvind Subramanian & Martin Kessler, 2012. "The Renminbi Bloc is Here: Asia Down, Rest of the World to Go?," Working Paper Series WP12-19, Peterson Institute for International Economics, revised 2013.
  • Handle: RePEc:iie:wpaper:wp12-19

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    References listed on IDEAS

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    Cited by:

    1. Robert N McCauley & Tracy Chan, 2014. "Currency movements drive reserve composition," BIS Quarterly Review, Bank for International Settlements, December.
    2. Ito, Hiroyuki & McCauley, Robert N. & Chan, Tracy, 2015. "Currency composition of reserves, trade invoicing and currency movements," Emerging Markets Review, Elsevier, vol. 25(C), pages 16-29.
    3. Barry Eichengreen & Domenico Lombardi, 2017. "RMBI or RMBR? Is the Renminbi Destined to Become a Global or Regional Currency?," Asian Economic Papers, MIT Press, vol. 16(1), pages 35-59, Winter/Sp.
    4. Yin-Wong Cheung & Menzie D. Chinn & Xingwang Qian, 2014. "The Structural Behavior of China-US Trade Flows," CESifo Working Paper Series 5123, CESifo Group Munich.
    5. Noland, Marcus, 2015. "Unconventional monetary policy, spillovers, and liftoff: implications for Northeast Asia," MPRA Paper 67984, University Library of Munich, Germany.
    6. Yin-Wong Cheung & Menzie Chinn & Xingwang Qian, 2016. "China–US trade flow behavior: the implications of alternative exchange rate measures and trade classifications," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 43-67, February.
    7. Kawai, Masahiro & Pontines, Victor, 2016. "Is there really a renminbi bloc in Asia?: A modified Frankel–Wei approach," Journal of International Money and Finance, Elsevier, vol. 62(C), pages 72-97.
    8. Eichengreen, Barry & Flandreau, Marc & Mehl, Arnaud & Chitu, Livia, 2017. "International Currencies Past, Present, and Future: Two Views from Economic History," OUP Catalogue, Oxford University Press, number 9780190659455.
    9. Volz, Ulrich, 2013. "RMB internationalisation and currency co-operation in East Asia," Working Papers 125, University of Leipzig, Faculty of Economics and Management Science.

    More about this item


    Exchange rates; China; renminbi; currency internationalization; reserve currency;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions


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