Does China’s GVC Participation Affect the RMB’s “Anchor Currency” Effect?

Ronghai Yang and Xiao Wang

Emerging Markets Finance and Trade, 2025, vol. 61, issue 12, 3821-3840

Abstract: This paper explores the impact of China’s participation in the Global Value Chain (GVC) on the role of the RMB as an anchor currency. Using panel data from 165 countries (regions) covering the period from 2000 to 2021 and applying the modified two-step Frankel-Wei model, the study finds that GVC participation significantly influences the RMB’s “anchor currency” effect, but this relationship varies across industries. PSTR model analysis reveals a pronounced nonlinear relationship between China’s GVC participation and the RMB’s “anchor currency” effect. In conclusion, while China’s GVC participation bolsters the RMB’s “anchor currency” effect, the relatively low level of China’s GVC participation in many industries prevents it from reaching the threshold necessary for a more substantial positive effect. This limitation suggests that the progress of RMB internationalization still requires further enhancement.

Date: 2025
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DOI: 10.1080/1540496X.2025.2488998

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