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The rise of China has accelerated Renminbi (RMB) internationalization. While there seems to be global support for RMB internationalization, there is a gap in understanding how developing nations, facing potential domestic skepticism, rationalize and articulate their support. This article discusses narratives that states use to legitimize their support for RMB internationalization. Using the case of Indonesia, this article examines the country's policy responses to China's RMB internationalization strategy. It uncovers that Indonesia frames its engagement with RMB internationalization not merely as an endorsement of China's global ambitions but as a strategic move to hedge against US dollar vulnerability and to foster broader Asian regional integration, particularly in terms of currency cooperation. This article enriches the existing literature, providing a nuanced perspective on how states navigate the complexities of international economic diplomacy, crafting narratives that align with their strategic interests and policy objectives in the evolving landscape of global currency politics. [ABSTRACT FROM AUTHOR]

Abstract This article investigates the time-frequency volatility spillovers between Chinese renminbi onshore and offshore markets during the COVID-19 crisis. By employing wavelet analysis, we find that: (i) As the timescale increases, the volatility spillovers between renminbi onshore and offshore markets are gradually significant and bidirectional, and they have increased significantly after the COVID-19 outbreak. (ii) The significant volatility spillovers of the two markets are decomposed into many sub-spillovers on different timescales, most possibly precipitated by heterogeneous behaviors across various investment horizons. (iii) During the COVID-19 crisis, the onshore market has the dominant position on price discovery and leads the offshore market.

It is widely assumed that the renminbi (RMB) cannot acquire a meaningful place in central bank reserve portfolios without full liberalization of China's capital account. We argue that the RMB can in fact develop into an international reserve currency in the absence of capital‐account convertibility. Trade and investment links can drive use despite limited access to Chinese financial markets. But this route to currency internationalization requires policy support. China must provide access to RMB through loans and the People's Bank of China (PBoC) currency swaps. It must ensure the convertibility of RMB into US dollars in offshore markets. It must provide RMB services at a stable and predictable price. Currency internationalization without full capital‐account liberalization thus requires the RMB to be backed by dollar reserves, which the PBoC consequently will continue to hold and use. Hence, we do not foresee RMB internationalization as supplanting dollar dominance. [ABSTRACT FROM AUTHOR]

AbstractThis article calls for a new research agenda that helps capture the dynamic processes of RMB internationalization in particular and currency internationalization in general. The aperture we have found in the existing, transaction-based literature is that there is relatively little to say about the process of currency network expansion. Indeed, no serious work on currency internationalization ignores the role of currency networks in the politics of the currency pyramid. However, the problem is that these works treat the currency networks exogenously. By exogenous treatment, we mean that they explain the expansion and constriction of currency networks as by-products of trade and investment. In our view, this exogenous treatment of currency networks results in an analytical blind spot regarding how currency network expansion occurs, which is pivotal to the success or failure of currency internationalization. Instead, this article suggests that adequate assessment of RMB internationalization requires shifting the analytical focus to the endogenous process of currency network expansion across borders that involves the emerging and ongoing process of RMB’s financial rise in the global economy. China’s recent move toward financial opening may work to speed up RMB-based global financial networks. [ABSTRACT FROM AUTHOR]

This article discusses the prospects of the Chinese renminbi (RMB) to expand its sphere of influence and become a full-scale reserve world currency. The methods used in the article are retrospective analysis and graphic analysis. The work is divided into three sections. The first section provides a broad overview of modern reserve currencies. The second part characterizes RMBs shaping as a reserve currency, as well as inner and outer factors that influence its status. The third section includes information about RMBs current status and its perspectives for being a reserve currency in the future. The article argues that currently RMB has already become a regional reserve currency in Asia-Pacific. Chinese government continues to make steps towards international expansion of RMB, yet these steps cannot make RMB one of the leading world currencies together with USD and EUR in the nearest decade.

This paper proposes state space modeling and Kalman filtering as the theoretical foundation to explore the impact of China’s monetary policy on the offshore RMB market and capital flows. In the state space model, the relationship between observable and unobservable variables is established, with the Hidden Markov Model representing the state vector as a first-order Markov process to estimate unobservable variables. Additionally, a variable parameter state space model is proposed to alter the relationship between explanatory variables and the dependent variable. Kalman filtering, as the core of the state space model solution algorithm, calculates the likelihood function through prediction error decomposition to estimate unknown parameters. The optimal lag of the model is determined to be 2 after constructing the VAR model in the empirical analysis, and the first-order autoregressive model is used to calculate variable parameters. The elasticity coefficient of the depth of development of the offshore RMB market on capital flows is the most significant variable, with a value of 0.96. Following this, the RMB exchange rate has an elasticity coefficient of 0.78.

As China's position in the global economy has gradually improved, the importance of debates on the role of the renminbi in the international monetary system has significantly increased. This paper uses bibliometric methods—Bibliometrix R-package and its web-based graphical interface Biblioshiny—applied to data imported from Web of Science and Scopus to investigate and synthesize the renminbi literature published in English between 1995 and 2021. Science mapping offers a visual representation of different networks and clusters of authors' keywords. The performance analysis, a quantitative evaluation of the most published sources, authors and papers on renminbi internationalization in the last 25 years, shows that the interest on the topic has grown, particularly after 2009 and 2016, respectively. There is also a high degree of concentration in the field, considering that out of the 802 analyzed papers, published in 393 sources, five authors and four journals had the highest impact. The content analysis identifies the main directions in the renminbi internationalization literature and future research questions to further explore this subject. The COVID-19 pandemic and post-Ukraine war era could generate a deeper reform of the international monetary system, in which the Chinese currency will strengthen its global position alongside the US dollar and the euro. [ABSTRACT FROM AUTHOR]

China’s increasing trade volume and continuous integration with global financial markets have strengthened the influences of the renminbi on the exchange rates of different currencies. Previous studies find closer co-movements between the renminbi and other currencies. This paper is novel to investigate the underlying determinants of the comovement further, using panel data of over thirty-four countries. Our results show that stronger bilateral trade and financial linkages with China have a positive association with the currency co-movement. Moreover, countries with greater flexibility in exchange rate regimes show stronger co-movements. These findings imply that growing co-movements are the consequence of autonomous decisions at the market rather than that of management by governments or central banks.