Renminbi Internationalization: A Journey to Where?

Abstract

The renminbi is currently undergoing a process of internationalization which has raised fundamental questions about the evolution of the international monetary system and the dominance of the US dollar. In this article, we assess how far the renminbi has travelled down the internationalization road and analyse the possibilities for it challenging the role of the US dollar in the future. We utilize Cohen's (1971) taxonomy to document the current dimensions of renminbi internationalization. Looking forward, we briefly summarize three common approaches to analysing currency internationalization, and propose a new approach. We argue that renminbi internationalization should be seen as a response to crises, first the Asian financial crisis and then the global financial crisis. As such, we argue that current internationalization has been driven by short-term problem solving rather than a coherent long-term strategy. The current path of RMB internationalization is best described as one of 'currency normalization' rather than 'currency dominance'.

China and Special Drawing Rights—Towards a Better International Monetary System

“…RMB internationalization is perhaps more a response to crises such as the Asian financial crisis and the global financial crisis, a short-term problem-solver rather than coherent long-term strategy. At best, RMB internationalization could be described as a matter of 'currency normalization' rather than 'currency dominance' (Bowles and Wang 2013).…”

The Role of London and Frankfurt in Supporting the Internationalisation of the Chinese Renminbi

“…He suggests that sustained economic policy effectiveness and economic reform will be necessary for the RMB to fully internationalize. Bowles and Wang (2013) examine these economic determinants in the context of the feasibility of a bipolar monetary system. They suggest that RMB internationalization can be seen as a "normalization" process whereby the currency of the world's second largest economy becomes more used.…”

Reinvestigation of the Interaction between the RMB Onshore and Offshore Markets: An Empirical Analysis Based on Hourly Data

“…For seven years as a trade settlement currency, the offshore RMB-denominated trade settlement business grew steadily in the international market, the range of holding and using RMB, also expanded, an indication that the Hong Kong offshore market played an important role. As the premier offshore RMB business 1 As Bowles and Wang [19] noted, "RMB internationalization measures have been introduced as responses to crises-first the Asian financial crisis, then the global financial crisis." Their conclusion is that instead of the "Grand Design" of becoming the world's dominant currency, the internationalization of the RMB has arisen as a policy response to crises, it is only a journey to normalization.…”