The Benefits and Costs of Renminbi Internationalization

29 Pages Posted: 24 May 2014

See all articles by Liqing Zhang

Liqing Zhang

Central University of Finance and Economics (CUFE)

Kunyu Tao

Central University of Finance and Economics

Date Written: May 23, 2014

Abstract

Despite the increasing recognition that the renminbi (RMB) may eventually become a key global currency, several important questions remain to be answered. This paper analyzes the benefits and costs of the RMB becoming an international currency. The benefits include reduced exchange risk, promotion of the development of the financial market, and expansion of firms in the People’s Republic of China. The costs include general costs, which complicate monetary policy and exchange rate policy, and several transitional risks. The study argues that the benefits of RMB internationalization should surpass the costs, particularly in the long run, and provides comprehensive policy choices for a sustainable process of RMB internationalization.

Keywords: renminbi internationalization, financial development, transitional risks, international monetary system

JEL Classification: F42, F31, F36

Suggested Citation

Zhang, Liqing and Tao, Kunyu, The Benefits and Costs of Renminbi Internationalization (May 23, 2014). ADBI Working Paper 481, Available at SSRN: https://ssrn.com/abstract=2441110 or http://dx.doi.org/10.2139/ssrn.2441110

Liqing Zhang (Contact Author)

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Kunyu Tao

Central University of Finance and Economics ( email )

39 South College Road
Beijing
China

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