Who cares about the Renminbi

Many researchers have examined the role of the Renminbi as an international currency, particularly after the Chinese authorities undertook policy initiatives for Renminbi internationalisation. We measure one aspect of Renminbi internationalisation: its role in de facto exchange rate arrangements as an anchor. We find that over 70 currencies have shown significant co-movements with the Renminbi over 2005-2017. Most of this global role is the response of some national currencies to unanticipated Renminbi depreciation. However, the contribution to explained variance by the Renminbi for detected currency-regime periods is very small, less than 2% on average, even in East Asian and Pacific-Rim countries who are known to closely track the Renminbi. This suggests that the Renminbi has thus far achieved a very small role in global exchange rate arrangements. Local currency co-movement with the Renminbi is strongest for countries with export exposure to China and Belt and Road initiative linkages. There is heterogeneity in this effect when conditioning on continent, exporter-type, net trade exposure and policy linkages like Belt and Road initiative suggesting multiple modes of future Renminbi internationalisation.