RMB transnationalization and the infrastructural power of international financial centres

Abstract

The internationalization of the renminbi (RMB) raises important questions concerning dynamics of transformation within the post-crisis global monetary order. International political economists have predominantly analysed the currency's crossborder evolution as a consequence of China's macroeconomic conditions, domestic politics, and currency statecraft within a broader framework of international monetary hierarchy. In this article, we draw upon insights from financial geography to rethink the rise of the RMB as a process of transnational market-making involving actors and political agency across distinctive scales. We develop a multi-scalar framework that illuminates the distinctive agency of London and Hong Kong in this process, conceptualizing it as a form of subnational infrastructural power that facilitates financial market-making in concert with (and despite) dynamics of interstate geopolitics. This goes some way in remedying the scalar deficiency of existing theories of political economy of international money, as well as integrating considerations of power and political agency into financial geography perspectives. Empirically, we trace how the unique development of London's offshore RMB market reflects this interplay between private financial actors, municipal-level authorities, and national political priorities. Finally, we discuss how IFC-led market-making relates to system-level dynamics by both facilitating 'tipping points' in global monetary change, as well as diluting national monetary power.

Digital currencies, monetary sovereignty, and U.S.–China power competition

“…Finally, as eight million merchants have accepted the digital RMB, it needs to be pointed out that local actors outside of China have an essential role in the growth of China-centered infrastructures (cf. Green & Gruin, 2021). And there are growing concerns with privacy and surveillance, which tend to undermine trust and credibility.…”

“…China chose international financial centers (IFCs), such as London and Hong Kong, to construct offshore RMB markets. In the process of transnational market‐making, IFCs serve as important sites of infrastructural power, and the Chinese structural power is broadened through the governance of offshore RMB (Green & Gruin, 2021). Notably, the linking of the e‐Yuan pilot projects in Hong Kong with the Faster Payment System, a financial infrastructure introduced in 2018 by the Hong Kong Monetary Authority (HKMA), intends to boost RMB offshore trading (Green & Gruin, 2021; T. Shen, 2022).…”

“…Conceptually, our study bridges two burgeoning research topics: monetary power and techno‐geopolitics. We contribute to the research on China's monetary power (Cohen, 2012; Helleiner & Kirshner, 2014; Kwon, 2015; W. Shen & Hou, 2021) by exploring the digitization of international financial (infra)structures and networks (de Goede, 2021; Green & Gruin, 2021; Rella, 2020). By examining digital currencies and financial blockchain applications, we also broaden the technologies included in research on the techno‐geopolitics of China and the United States (Mueller, 2020; Rosenbach & Mansted, 2019; Wong, 2021).…”

Finance/security infrastructures

“…Within IPE, there is now increasing recognition of the politics of infrastructures. In their recent special issue on the theme, Bernard and Campbell-Verduyn set out a research agenda for analyzing financial infrastructures and technologies (also Green & Gruin, 2020;Weiss & Thurbon, 2018). They argue that an agenda focused on infrastructures has the capacity to build analytical bridges in the study of the material and the ideational; the micro and the macro; and the technical and political.…”

“…At stake are not just the relations between the EU and US and business with Iran moreover, but broader global divides over sanctions and security that are being fought through payment infrastructure (Green & Gruin, 2020). One Russian observer has called the SWIFT system 'A Potential Weapon in the Hybrid War', and underlines the need for Russian banks to protect themselves from future payment wars, by developing autonomous global payments infrastructures 'fully independent of any payment systems controlled by the United States and European Union'.…”