Renminbi Internationalization in the New Normal: Progress, Determinants and Policy Discussions

23 Pages Posted: 7 May 2020

See all articles by Cheng Li

Cheng Li

Chinese Academy of Social Sciences (CASS)

Xiaojing Zhang

Chinese Academy of Social Sciences (CASS)

Date Written: March–April 2017

Abstract

In the present paper we explore the internationalization of the renminbi with reference to the experiences of other monetary powers, and discuss its determinants, prospects and implications for China's development in the “new normal.” Specifically, after summarizing the major progress made thus far, we conduct a regression analysis, showing that economic size and financial conditions are significant determinants of the international currency status, while inertia and other unobserved factors also play important roles. These empirical findings enable us to undertake a scenario analysis focusing on the renminbi's potential to become a global reserve currency. Based on this quantitative research, we then revisit China's policy initiatives designed to promote its currency overseas. In our view, the internationalization of the renminbi, along with financial deepening and liberalization, should be regarded as a means to achieve China's goal of reaching a more sustainable and balanced model of development.

Keywords: financial development, international currency, panel data, renminbi

JEL Classification: F33, G15, O16

Suggested Citation

Li, Cheng and Zhang, Xiaojing, Renminbi Internationalization in the New Normal: Progress, Determinants and Policy Discussions (March–April 2017). China & World Economy, Vol. 25, Issue 2, pp. 22-44, 2017, Available at SSRN: https://ssrn.com/abstract=3594688 or http://dx.doi.org/10.1111/cwe.12192

Cheng Li (Contact Author)

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732
China

Xiaojing Zhang

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732
China

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