Pages

Showing posts with label economic globalization. Show all posts
Showing posts with label economic globalization. Show all posts

Saturday, August 23, 2025

RMB internationalization to greatly stabilize global financial system

 China Barometer logo

Chinese yuan Photo:VCG

RMB internationalization is a systematic solution for China to effectively address the deepening impact of geo-economic risks in the world, which also contributes to stabilizing global markets as well as the international financial system.

Some countries refuse to relinquish their long-held dominant positions and monopolistic power in global supply chains, the global monetary and financial systems, as well as global governance. Technology blockades, financial sanctions, and the abusive use of legislative and regulatory "long-arm jurisdictions" are specific manifestations of those countries leveraging their power to artificially create geo-economic risks.

As the Chinese currency, the RMB or the yuan, increasingly matures into a major international currency, it can bring a diversified mechanism into the international monetary and financial system, helping mitigate the systemic risks arising from the inherent instability of a world economic order based on self-interest and a monopolistic core. In this sense, RMB internationalization benefits not only China but also the whole world.

The Belt and Road Initiative (BRI) and the Regional Comprehensive Economic Partnership (RCEP) framework are both China's practices of new regional economic integration, adhering to the principles of consultation, joint construction and sharing. They prioritize development, sovereign equality, and respect for differences in varied countries' development stages, focusing on infrastructure construction and integration of institutional rules to collectively promote inclusive development and re-globalization. Both the BRI and the RCEP framework hold significant importance for RMB internationalization.

The more critical an economy's position in the global supply chain, the more effective it is in enhancing the welfare of supply chain partners and strengthening supply chain resilience through providing better financial services. Also, as a country's financial system improves its ability to support the sustainable growth of the global supply chain, the foundation for the international use of its currency is inevitably solidified. 

Therefore, in international economic and trade cooperation primarily involving developing countries, China should fully leverage its role as a regional powerhouse in integrating industrial and supply chains, continuously optimizing the hardware and software conditions for the member countries to use and hold the Chinese currency. 

By promoting regional economic and financial integration, China should advance the economic and financial development of the member countries, continuously improve resource integration efficiency, share the developmental dividends of multilateral cooperation, and build a community with a shared future in the field of economic and trade cooperation.

The BRI and the RCEP have the potential to become crucial platforms for promoting RMB internationalization, but they also face numerous obstacles and challenges. Currently, the level of RMB usage in those regions remains relatively low, and its competitive advantage over other major international currencies is not yet prominent. 

On one hand, the convenience and flexibility for non-Chinese residents to acquire, use, and hold RMB for trade, investment, risk management, or asset allocation are far from ideal. On the other hand, the breadth, depth, and openness of China's financial markets, as well as the efficiency of macroeconomic risk management, remain insufficient to support broader international use of the currency. These constraints are expected to be gradually addressed through high-quality financial development and greater financial opening-up.

China is a staunch supporter of new economic globalization, as we believe that fostering a cooperative, win-win and open global economy aligns with the common interests of the humanity and represents the right direction for historical progress. 

As a key regional player, China should shoulder greater responsibilities and play a more significant role. Emphasis should be placed on enhancing the "hard connectivity" of financial infrastructure and the "soft connectivity" of institutional rules to create better conditions for the widespread use of the RMB in the region. 

China should actively promote RMB's role as a global public good in areas such as trade pricing and settlement, financial transactions, and reserve assets, while promptly addressing the practical demands of regional member countries for secure and reliable international liquidity assets.

Notably, amidst the growing impact of deepening geo-economic risks in the world, the global payment system and official reserve currencies of various countries are showing a trend toward diversification. 

Our research finds that as the geo-economic risk index (GER) rises, RMB Internationalization index (RII) also increases. In the context of the evolving global payment system and reserve currency landscape under the geo-economic shocks, efforts should be made to strengthen the Cross-border Interbank Payment System (CIPS), seize the development opportunities of central bank digital currencies (CBDC), and create new prospects for RMB internationalization.

The author is deputy director of International Monetary Institute of Renmin University of China. bizopinion@globaltimes.com.cn


RELATED ARTICLES

RMB internationalization to greatly stabilize global financial system

 China Barometer logo

Chinese yuan Photo:VCG

RMB internationalization is a systematic solution for China to effectively address the deepening impact of geo-economic risks in the world, which also contributes to stabilizing global markets as well as the international financial system.

Some countries refuse to relinquish their long-held dominant positions and monopolistic power in global supply chains, the global monetary and financial systems, as well as global governance. Technology blockades, financial sanctions, and the abusive use of legislative and regulatory "long-arm jurisdictions" are specific manifestations of those countries leveraging their power to artificially create geo-economic risks.

As the Chinese currency, the RMB or the yuan, increasingly matures into a major international currency, it can bring a diversified mechanism into the international monetary and financial system, helping mitigate the systemic risks arising from the inherent instability of a world economic order based on self-interest and a monopolistic core. In this sense, RMB internationalization benefits not only China but also the whole world.

The Belt and Road Initiative (BRI) and the Regional Comprehensive Economic Partnership (RCEP) framework are both China's practices of new regional economic integration, adhering to the principles of consultation, joint construction and sharing. They prioritize development, sovereign equality, and respect for differences in varied countries' development stages, focusing on infrastructure construction and integration of institutional rules to collectively promote inclusive development and re-globalization. Both the BRI and the RCEP framework hold significant importance for RMB internationalization.

The more critical an economy's position in the global supply chain, the more effective it is in enhancing the welfare of supply chain partners and strengthening supply chain resilience through providing better financial services. Also, as a country's financial system improves its ability to support the sustainable growth of the global supply chain, the foundation for the international use of its currency is inevitably solidified. 

Therefore, in international economic and trade cooperation primarily involving developing countries, China should fully leverage its role as a regional powerhouse in integrating industrial and supply chains, continuously optimizing the hardware and software conditions for the member countries to use and hold the Chinese currency. 

By promoting regional economic and financial integration, China should advance the economic and financial development of the member countries, continuously improve resource integration efficiency, share the developmental dividends of multilateral cooperation, and build a community with a shared future in the field of economic and trade cooperation.

The BRI and the RCEP have the potential to become crucial platforms for promoting RMB internationalization, but they also face numerous obstacles and challenges. Currently, the level of RMB usage in those regions remains relatively low, and its competitive advantage over other major international currencies is not yet prominent. 

On one hand, the convenience and flexibility for non-Chinese residents to acquire, use, and hold RMB for trade, investment, risk management, or asset allocation are far from ideal. On the other hand, the breadth, depth, and openness of China's financial markets, as well as the efficiency of macroeconomic risk management, remain insufficient to support broader international use of the currency. These constraints are expected to be gradually addressed through high-quality financial development and greater financial opening-up.

China is a staunch supporter of new economic globalization, as we believe that fostering a cooperative, win-win and open global economy aligns with the common interests of the humanity and represents the right direction for historical progress. 

As a key regional player, China should shoulder greater responsibilities and play a more significant role. Emphasis should be placed on enhancing the "hard connectivity" of financial infrastructure and the "soft connectivity" of institutional rules to create better conditions for the widespread use of the RMB in the region. 

China should actively promote RMB's role as a global public good in areas such as trade pricing and settlement, financial transactions, and reserve assets, while promptly addressing the practical demands of regional member countries for secure and reliable international liquidity assets.

Notably, amidst the growing impact of deepening geo-economic risks in the world, the global payment system and official reserve currencies of various countries are showing a trend toward diversification. 

Our research finds that as the geo-economic risk index (GER) rises, RMB Internationalization index (RII) also increases. In the context of the evolving global payment system and reserve currency landscape under the geo-economic shocks, efforts should be made to strengthen the Cross-border Interbank Payment System (CIPS), seize the development opportunities of central bank digital currencies (CBDC), and create new prospects for RMB internationalization.

The author is deputy director of International Monetary Institute of Renmin University of China. bizopinion@globaltimes.com.cn


RELATED ARTICLES

Friday, March 28, 2025

Boao forum conveys powerful roar of Asian engine

 

Ban Ki-moon, Boao Forum for Asia Chairman of the Board, addresses a plenary session at the BFA on March 27, 2025. Photo: IC




The Boao Forum for Asia (BFA) Annual Conference 2025 opened on Thursday in Boao, South China's Hainan Province.

Chinese Vice Premier Ding Xuexiang, also a member of the Standing Committee of the Political Bureau of the Communist Party of China Central Committee, attended the opening ceremony, calling for strengthening mutual trust, enhancing win-win cooperation, promoting economic globalization and safeguarding the free trade system. 

Ding's remarks resonated with officials, business executives as well as scholars participating in the forum. They called for collaboration, highlighting China's role as a stabilizer and promoter of the global multilateral framework and free trade at a time when the world is facing increasing global challenges such as climate change and a complex international situation.

However, as voices for cooperation spoke loudly during the ongoing BFA, the US on Wednesday announced plans to impose 25-percent auto tariffs, with the measures set to take effect on April 2. Participants at the forum slammed the US' irresponsible move, saying that unilateralism has no future.

China presents opportunity

On the Chinese economy, Ding said economic performance in the country has been running steadily with a stronger outlook. The country will do its best to fulfill this year's goals and tasks for economic and social development, he said. "China is confident of realizing these goals and will contribute to development in Asia and the world."

Noting that China has set an economic growth target of around 5 percent for 2025, Michele Geraci, former Undersecretary of State at the Italian Ministry of Economic Development, told the Global Times that "I think 5 percent is a very, very good number...we do know that China is now evolving into a high-tech, innovative model, and this is also reassuring."

"This year, technology and innovation will become the main driver for China's economy," Geraci said, taking DeepSeek as an example, "It's open source, it's cheap, it's fast. DeepSeek is more efficient in the use of resources... and when we have a tech revolution that makes the hardware cheaper, that means that the whole world now can start developing applications on top of this hardware that is not as expensive as we thought it would be."

Wang Huiyao, founder and president of the Center for China and Globalization, a leading Chinese nongovernmental think tank, said that China is once again sending a signal to the world of its continuous opening-up, and the country will put the goals set during the annual two sessions into practice this year. "This has given the world a 'reassuring pill,' and China serves as the ballast stone of global development," Wang told the Global Times.

Jenny Shipley, former Prime Minister of New Zealand, told the Global Times on Thursday during the forum that "One of the greatest strengths of the Boao forum is that it brings government leaders and visitors from around the world, and they cherish the moment to be able to hear the update."

"The speech this morning gave real clarity on areas that China is focusing on. And I know that many people will take that back to their own businesses and to their home economies and think about how we can as partners leverage together. So it was an excellent speech, refreshing in this moment where people are very distracted. And I think we'll create some positive momentum after this conference," she noted.

Unilateralism vs multilateralism

While the BFA was advocating multilateral cooperation and free trade, the US announced on Wednesday its decision to impose 25 percent tariffs on imports of automobiles and certain automobile parts under the name of a so-called national security threat, a move that CNN described as "a significant escalation in a global trade war."

The new levies on cars and light trucks will take effect on April 3, the day after US plans to announce reciprocal tariffs aimed at the countries responsible for the bulk of the US trade deficit, Reuters reported. They come on top of duties already introduced on steel and aluminum, and on goods from China.

Speaking at a session of the BFA themed "US Foreign Policy and Its Implications on Asia-Pacific Cooperation" on Thursday, panelists from home and abroad outlined their respective concerns over the US government's tariff policy, saying that the move will not serve its purpose but backfire on the US.

"Do not try hard to understand the new US administration's trade policy. It is based on many falsehoods and many basic misunderstandings. It is primitive," US economist Jeffrey Sachs said at Thursday's session.

"If you do the basic arithmetic, the tariffs don't come anywhere close to offsetting the tax cuts for the richest people in America... they (tariffs) hit the poor Americans," Sachs said.

The American economist also noted that the tariffs will not protect the corresponding US industry but will have the opposite effect. "When the auto duties were announced, what happened to the auto share prices? They went down 5 percent... this will harm the US auto industry, making it permanently uncompetitive," Sachs said.

Responding to the tariff policy of the new US administration, Cui Tiankai, a former Chinese Ambassador to the US, said at the session that "more tariffs is an indication of less competitiveness... afraid of competition. It's a lack of confidence."

The latest tariff moves, particularly the increased tariffs on the automotive sector, are part of a broader pattern of escalating measures by the new US administration, Wang Huiyao said.

Wang believes the 25 percent tariff hike on automobiles will have little impact on China, "as we do not export many cars to the US." In contrast, this move will have a significant effect on other countries, such as those in Europe and Japan, Wang said.

In stark contrast with the US move, China has a clear perspective on tariffs, which is exemplified by offering zero-tariff treatment on 100 percent of tariff lines to the 43 least developed countries with which it has diplomatic relations in a bid to support their development and foster mutual benefits.

While the US raises tariffs, we are lowering them, creating a dynamic contrast, Wang said. 

Zheng Yongnian, dean of the School of Public Policy at the Chinese University of Hong Kong, Shenzhen, said during the BFA that we should not underestimate the ability of China's opening-up policy to reshape the global trading system. China has now entered a high level of openness, and its unilateral opening-up is the best international public platform.

"History has proven time and again that only with opening-up and cooperation can a better prospect be embraced. China will continue to join hands with all parties to create an open, fair, just and non-discriminatory environment for sci-tech development, bringing benefits to more countries and peoples," Guo Jiakun, spokesperson from China's Foreign Ministry, said on Thursday.


RELATED ARTICLES