The Benefits and Costs of Renminbi Internationalization

Liqing Zhang and Kunyu Tao
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Liqing Zhang: Asian Development Bank Institute
Kunyu Tao: Asian Development Bank Institute

No 481, ADBI Working Papers from Asian Development Bank Institute

Abstract: Despite the increasing recognition that the renminbi (RMB) may eventually become a key global currency, several important questions remain to be answered. This paper analyzes the benefits and costs of the RMB becoming an international currency. The benefits include reduced exchange risk, promotion of the development of the financial market, and expansion of firms in the People’s Republic of China. The costs include general costs, which complicate monetary policy and exchange rate policy, and several transitional risks. The study argues that the benefits of RMB internationalization should surpass the costs, particularly in the long run, and provides comprehensive policy choices for a sustainable process of RMB internationalization.

Keywords: renminbi internationalization; financial development; transitional risks; international monetary system (search for similar items in EconPapers)
JEL-codes: F31 F36 F42 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014-05-23
New Economics Papers: this item is included in nep-opm, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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