Will the Chinese currency achieve global status during the 2020s?

Nikolić, Goran and Petrović, Predrag (2021) Will the Chinese currency achieve global status during the 2020s? Nacionalni interes, 40 (1). pp. 285-307. ISSN 1820-4996

Text PPetrovic_Nacionalni_interes_2021_1.pdf - Published Version Available under License Creative Commons Attribution Non-commercial No Derivatives. Download (586kB)

Abstract

The COVID-19 pandemic, and the related economic crisis, catalyzes the global power rebalance, from West to East, affecting the currency markets. It is estimated that the influence of the renminbi (RMB) will significantly strengthen during the third decade of the 21st century, with RMB becoming the third largest reserve currency at the end of that period. This is related to the increased willingness of foreign investors to enter one of the few capital markets that are expected to grow significantly in the post-COVID-19 era, primarily due to the accelerating liberalization of Chinese financial markets and the expected appreciation of the RMB in the 2020s. The development of the first sovereign digital currency by Beijing will also play a critical role in RMB internationalization. The enormous size of the Chinese economy and the growing role of the RMB represent the most serious challenge for the US and the dollar so far. In the expected upcoming multi-polar world, it is conceivable that the dollar continues to play a predominant - but not exclusive as now - role in international trade and finance. So, it is clear that RMB is still far from the world’s reserve currency, which requires full convertibility and full capital account liberalization, but the path to a three-polar monetary system, consisting of the dollar, euro, and renminbi, is in sight.

Actions (login required)

View Item