The internationalization of Chinese RMB

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Marconi, Nelson
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With the rise of China for the last 30 years, its currency RMB is gaining more presence in the international trading. The Chinese government has been sending positive signals for internationalizing its currency in the recent decade but it still remains a question how it would execute the process. This dissertation focuses on discussing how a government should internationalize its currency, if it is in its interest and what it implies for Chinese government. We first look into the current situation for RMB internationalization. Then we look into Frankel (2014)’s currency theory and three important factors for the currency internationalization: the size of economy, the depth and openness of a country’s financial market, and the confidence in the value of the currency. Then we collect data to exam this theory. We then analyze the positive effect and negative effect of currency internationalization and how China developed coordinate policies in different periods In this dissertation, Frankel (2014) `s theory was proved in a different approach. We selected different variables and period to redid the test. We concluded that the internationalization of its currency is important but not prioritized for China.

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