We investigate the process of currency internationalisation by determining the pace of internationalisation of the Chinese Renminbi (RMB). In contrast to other published work that relies upon international banking, trade and currency statistics, we utilise aggregated cross-border data provided by the Society for Worldwide Interbank Financial Telecommunications (SWIFT). This data allows better measurement of the role played by a currency in international trade and capital account settlement.
RMB transactions in these areas have expanded significantly in recent years, although they remain concentrated in the financial centres of Hong Kong, Macau, Singapore and Taipei, where language and culture offer clear advantages. Recent RMB cross-border activity in London and New York shows that there is the potential to shift activity beyond the Asia-Pacific region, although the limited scope of RMB transactions highlights the underdevelopment of China’s domestic financial markets and the limited nature of cross-border transactions outside trade settlement and foreign exchange trading.
Our analysis shows that the footprint of Chinese corporations in international markets has at times been significant, with the size of these transactions prompting many to reassess the likely pace of RMB internationalisation. However, on-balance, China’s path to RMB internationalisation remains slow and runs the risk of failing to fully capitalise upon the opportunities that are now unfolding as the international economic and political landscape shifts more towards its favour.
by Jonathan Batten and Peter SzilagyiDownload (1.42MB)