The Anatomy of the internationalization of the RMG

Ayako Saiki

No e174, Working Papers from Tokyo Center for Economic Research

Abstract: Using daily data between 2019 and 2021, this study examines the influence of the renminbi (henceforth RMB) on all currencies globally. It finds that the RMB's influence is significant and the largest among the CNY, USD, GBP, JPY and EUR for ten countries, which we call the "RMB bloc" countries. These are mainly small countries in Africa and Latin America, and their main export products are commodities, particularly minerals. There was no sign of the "RMB bloc" emerging in Asia. In addition, I analyze the determinants for becoming an "RMB bloc" country and find that commodity exports per GDP are the most important and robust determinant. China's loans are significant but negative, reflecting that China's overseas loans are exclusively denominated in the US dollar. The overall result shows that there is a long way to go for the RMB to become the third international currency next to the USD and euro. For Asian countries' currencies, the US dollar's dominance is unchanged, and China's influence remains negligible. Countries that are "RMB bloc" are typically small economies with a high dependence on commodity exports.

Pages: 22 pages
Date: 2022-09
New Economics Papers: this item is included in nep-sea
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