The Role of Offshore Financial Centers in the Process of Renminbi Internationalization

30 Pages Posted: 8 Apr 2014

See all articles by Yin-Wong Cheung

Yin-Wong Cheung

City University of Hong Kong - Department of Economics & Finance; University of California, Santa Cruz - Department of Economics; University of California at Santa Cruz - Department of Economics

Date Written: April 6, 2014

Abstract

The People’s Republic of China (PRC) has been quite aggressive recently in promoting the international use of its currency, the renminbi. Historical experience suggests that an active offshore market is essential for a global currency. Indeed, anecdotal evidence affirms the role of offshore markets in pushing the renminbi currency to the world. One should not, however, overplay the contribution of offshore markets. While offshore markets offer the opportunities to experiment with the global use of the currency, the overseas acceptance of the renminbi is ultimately determined by both internal and external economic forces, and geopolitical factors. With its relatively small size, the offshore renminbi is not likely to pressure the PRC and alter its financial liberalization policy. A well-organized offshore renminbi market will complement the PRC’s renminbi internationalization policy, but it is not possible to raise the currency’s global status beyond the level justified by its economic and political attributes.

Keywords: renminbi, yuan, international monetary policy, currency internationalization, offshore currency market, onshore currency market, foreign exchange, financial centers

JEL Classification: F33

Suggested Citation

Cheung, Yin-Wong, The Role of Offshore Financial Centers in the Process of Renminbi Internationalization (April 6, 2014). ADBI Working Paper 472. Available at SSRN: https://ssrn.com/abstract=2421043 or http://dx.doi.org/10.2139/ssrn.2421043

Yin-Wong Cheung (Contact Author)

City University of Hong Kong - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

University of California, Santa Cruz - Department of Economics ( email )

435 Engineering 2
Santa Cruz, CA 95064
United States
831-459-4247 (Phone)
831-459-5077 (Fax)

University of California at Santa Cruz - Department of Economics ( email )

1156 High Street
Santa Cruz, CA 95064
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
376
Abstract Views
2,555
rank
81,399
PlumX Metrics