Will the Renminbi Become a World Currency?

Abstract

China has emerged as a major power in the world economy, so it seems natural to consider whether its currency will also have a major role. However, at present it is not used internationally. We look at the factors that contribute to the international use of currencies, and focus on the aspects of China's financial system that would have to change before the renminbi emerged as an important regional or world currency. Even with significant reforms, two important questions would remain: whether the authorities would want to encourage its international use, and whether an economy with substantial party control could gain international acceptance for its currency.

Keywords: China, Renminbi, Reserve currency

JEL Classification: F30, F31, F33, O24