Abstract
Ever since the proposition of Belt and Road Initiative, known as BRI, by President Xi of China in 2013, it has accelerated the internationalization of RMB in many different ways, involving financing, investment and so forth. This study affirms the feasibility of using BRI to encourage RMB’s internationalization around the globe. The situations of related regions and Chinese corresponding endeavor have been discussed separately, for example, 17+1 cooperation achievement in transport sector in Europe, investments to Africa in large infrastructure, industrial, and communications projects, and taking advantage of Egypt’s “zero tariff” in the Middle East. Afterwards, the analysis of central bank currency swaps and points out the benefits offered by RMB’s internationalization for closing the infrastructure gap of BRI, and the BRI’s providing better opportunity to further the internationalization of RMB. Finally, both opportunities and challenges for RMB’s internationalization in related to BRI are discussed. This paper reveals that the internationalization of RMB via BRI is promising. Despite all kinds of challenges which are confronted by China, the country is given giant hope to handle well and convert those into opportunities, to encourage the use of RMB around the globe and make its contribution to world’s economy.
Highlights
RMB internationalization improves China’s ability to reform global monetary system, develop domestic financial system, expand cross-border RMB trade and strengthen the RMB exchange rate
The study will address trade and investment projects along the Belt and Road Initiative (BRI) countries and use observational data of trade settlement, 3.1 RMB currency circulation, and 3.2 bulk commodity pricing to test the process of RMB internationalization
This paper studies the relationship and influence between the Belt and Road initiative and RMB internationalization
Summary
RMB internationalization improves China’s ability to reform global monetary system, develop domestic financial system, expand cross-border RMB trade and strengthen the RMB exchange rate. Gjoza concluded that a truly international RMB, one that becomes a potential dollar competitor, would be detrimental to U.S interests in a variety of ways, including: allowing China to build an alternative global financial and economic network based on RMB that is independent of the dollar markets and the reach of the U.S Treasury and increasing China’s ability to influence third-party countries [3]. Financial integration is one of the important goals of the BRI initiative, according to Chanthamith, B., et al, and it can be achieved by encouraging monetary policy coordination, internalization of the RMB for trade and investment, motivating financial cooperation, creating regional financial institutions, strengthening risk management cooperation, and encouraging regional mechanisms for managing financial risks [7]. This article provides the risks, challenges and potential opportunities that RMB internationalization may face under the background of BRI
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