RMB Internationalization

As the world’s largest net exporter of manufactured goods, China does not receive adequate compensation for its production costs in the form of counter-deliveries of high-value-added goods from other countries, due, among other things, to weak demand for the yuan from major importers of Chinese products. Low demand for the RMB (yuan) deprives China of the ability to finance its external debt in its own currency. While the role of the Chinese yuan in international transactions is significantly smaller than China’s role in the global economy, the share of the US dollar in servicing international payments is twice that of the US dollar in global GDP. The purpose of this article is to systematize the internal and external factors limiting the use of the Chinese yuan in foreign economic transactions. The article summarizes the key mechanisms facilitating the renminbi’s growing international role and the barriers hindering the full development of their potential. Institutional and systemic factors that hinder the renminbi’s ability to fulfill its international functions are identified. Internally, the renminbi’s internationalization is constrained by the policies of the People’s Bank of China and the specifics of China’s economic development model. Externally, the main barrier to strengthening the renminbi’s international role is opposition from the United States and other reserve currency issuers. It is concluded that to fully establish itself as a global economic leader and reduce the costs of economic globalization in the long term, China must develop and implement its own transcontinental payment and settlement infrastructure based on innovative international liquidity

China · Consolidation (business) · Currency · Debt · External debt · Globalization · Internationalization · Liberian dollar · Payment · Renminbi · COVID-19, Geopolitics, Technology, Migration · Global Financial Crisis and Policies · Sustainable Finance and Green Bonds

• Reserve Currencies

  A Kholopov•World Economy and International…•2025

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