The Impacts of Policy Infrastructures on the International Use of the Chinese Renminbi: A Cross-Country Analysis

Despite burgeoning research on the internationalization of the Chinese renminbi, there has been surprisingly little systematic analysis of how the renminbi is actually used in foreign markets. This study addresses this important gap in the literature by providing a cross-country analysis of renminbi use in offshore foreign exchange markets, with special attention to the effects of the cooperative policy measures adopted by China and foreign states aimed at promoting the renminbi’s international use. This research finds that a country’s participation in the Renminbi Qualified Foreign Institutional Investor scheme (which increases its renminbi investment opportunities) and its establishment of an offshore renminbi clearing bank (which provides better renminbi payment services) — but not its entry into a renminbi-local currency swap agreement — facilitate use of the renminbi in its foreign exchange markets. These findings demonstrate that states have played significant roles in the initial rise of the renminbi as a newly-internationalizing currency.