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The Benefits and Costs of Renminbi Internationalization

Author

Listed:
  • Zhang, Liqing

    (Asian Development Bank Institute)

  • Tao, Kunyu

    (Asian Development Bank Institute)

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. The study argues that the benefits of RMB internationalization should surpass the costs, particularly in the long run, and provides comprehensive policy choices for a sustainable process of RMB internationalization.

Suggested Citation

  • Zhang, Liqing & Tao, Kunyu, 2014. "The Benefits and Costs of Renminbi Internationalization," ADBI Working Papers 481, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0481
    as

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    File URL: http://www.adbi.org/files/2014.05.19.wp481.benefits.costs.renminbi.internationalization.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    renminbi internationalization; financial development; transitional risks; international monetary system;

    JEL classification:

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

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