The Renminbi as Global or Regional Currency

By Barry Eichengreen (UC Berkeley) & Domenico Lombardi (CIGI)

Link to paper, forthcoming in Asian Economic Papers.

The project, undertaken jointly with Domenico Lombardi of CIGI (Canada), sought to analyze the Chinese renminbi’s prospects as a global and regional currency, the question being whether the renminbi is more likely to play a consequential international role globally or within Asia.  To this end, the following aspects of renminbi internationalization were analyzed.

a)      The weight on the renminbi as an anchor currency in the exchange rate baskets of different countries, following the methodology pioneered by Frankel and Wei.

b)      The geographic distribution of People’s Bank of China renminbi swap lines, following the methodology of Garcia-Hererro et al.

c)       The timing of announcements designating official renminbi clearing banks for different foreign financial centers.

d)      The geographic distribution of QFI and QFII foreign investor renminbi quotas.

e)      The role of the renminbi in the IMF’s SDR basket and Asia’s Chiang Mai Initiative Multilateralization.

f)       The role of political linkages and alliances in the reserve-composition decisions of central banks and governments.

The analysis did not definitively determine whether the renminbi’s future was as a global or regional currency, but it identified factors and influences on which the outcome is likely to turn.

Research papers in this stream were presented in the 2015-6 academic year to seminars and conferences at UC Berkeley (Center for Chinese Studies), Stanford University (Center for Asian Studies), Harvard University, the University of Malaysia (Jeffrey Chia Institute), and the Korea Development Institute.

Link to paper, forthcoming in Asian Economic Papers.