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The Role of Offshore Financial Centers in the Process of Renminbi Internationalization

  • Cheung, Yin-Wong

    (Asian Development Bank Institute)

The People’s Republic of China (PRC) has been quite aggressive recently in promoting the international use of its currency, the renminbi. Historical experience suggests that an active offshore market is essential for a global currency. Indeed, anecdotal evidence affirms the role of offshore markets in pushing the renminbi currency to the world. One should not, however, overplay the contribution of offshore markets. While offshore markets offer the opportunities to experiment with the global use of the currency, the overseas acceptance of the renminbi is ultimately determined by both internal and external economic forces, and geopolitical factors. With its relatively small size, the offshore renminbi is not likely to pressure the PRC and alter its financial liberalization policy. A well-organized offshore renminbi market will complement the PRC’s renminbi internationalization policy, but it is not possible to raise the currency’s global status beyond the level justified by its economic and political attributes.

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Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 472.

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Length: 30 pages
Date of creation: 06 Apr 2014
Date of revision:
Handle: RePEc:ris:adbiwp:0472
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  1. Yin-Wong Cheung & Risto Herrala, 2014. "China's Capital Controls: Through the Prism of Covered Interest Differentials," Pacific Economic Review, Wiley Blackwell, vol. 19(1), pages 112-134, 02.
  2. Linda S. Goldberg & Cedric Tille, 2005. "Vehicle currency use in international trade," Staff Reports 200, Federal Reserve Bank of New York.
  3. Cheung, Yin-Wong, 2011. "Renminbi Going Global," Santa Cruz Department of Economics, Working Paper Series qt2qn810hg, Department of Economics, UC Santa Cruz.
  4. Barry Eichengreen, Marc Flandreau, 2010. "The Federal Reserve, the Bank of England, and the Rise of the Dollar as an International Currency, 1914-1939," IHEID Working Papers 16-2010, Economics Section, The Graduate Institute of International Studies.
  5. 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.
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  7. Yongding Yu, 2012. "Revisiting the Internationalization of the Yuan," Finance Working Papers 23311, East Asian Bureau of Economic Research.
  8. Yu, Yongding, 2012. "Revisiting the Internationalization of the Yuan," ADBI Working Papers 366, Asian Development Bank Institute.
  9. Tamim Bayoumi & Franziska Ohnsorge, 2013. "Do Inflows or Outflows Dominate? Global Implications of Capital Account Liberalization in China," IMF Working Papers 13/189, International Monetary Fund.
  10. Yin‐Wong Cheung & Guonan Ma & Robert N. McCauley, 2011. "Renminbising China'S Foreign Assets," Pacific Economic Review, Wiley Blackwell, vol. 16(1), pages 1-17, 02.
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