The Renminbi and Systemic Risk

Forthcoming, Journal of International Economic Law

66 Pages Posted: 16 Feb 2017 Last revised: 7 Aug 2017

See all articles by Chris Brummer

Chris Brummer

Georgetown University Law Center; Institute of International Economic Law (IIEL)

Date Written: February 15, 2017


The internationalization of China’s currency, the renminbi (“RMB”), is arising in ways that depart considerably from historical precedent and what “law and macroeconomic” theory would predict. Instead of waiting for international markets for its currency to evolve organically, the Chinese government has undertaken a quasi-mercantilist strategy designed to promote the currency and its own national RMB-based infrastructure. This strategy has emphasized tightly managed capital account deregulation over prudential reforms and robust market supervision, and incentivizes foreign jurisdictions to compete for RMB-based transactions.

China’s monetary strategy introduces novel systemic risks to the global financial system, including a potentially inadequate provision of renminbi liquidity, a regulatory race to the bottom between offshore RMB-hubs, and significant transmission belts of financial risk to even non-renminbi markets. To mitigate these risks, this Article outlines a policy recipe of stronger macroprudential oversight, transparent countercyclical capital account reforms and credible commitments to refrain from competitive currency devaluations.

Keywords: renminbi, systemic risk, currency manipulation, financial regulation, central banking

Suggested Citation

Brummer, Christopher J., The Renminbi and Systemic Risk (February 15, 2017). Forthcoming, Journal of International Economic Law, Available at SSRN: or

Christopher J. Brummer (Contact Author)

Georgetown University Law Center ( email )

Washington, DC 20057
United States


Institute of International Economic Law (IIEL) ( email )

Georgetown University Law Center
600 New Jersey Avenue, NW
Washington, DC 20001
United States


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