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1. Significant, but Not Systemic: The Challenge of China’s Efforts to Rival Western Financial Predominance

Author:
Martin Chorzempa and Lukas Spielberger
Publication Date:
05-2025
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Despite worldwide concerns about the US dollar, the Chinese renminbi is not yet ready to be a serious contender for leading international currency status. This Policy Brief examines three of the most important Chinese approaches to increasing the renminbi’s role as an international settlement currency: promote bilateral swap agreements between the People's Bank of China and other central banks; create international payment systems that do not involve the dollar, most notably the Cross-Border Interbank Payment System; and develop a central bank digital currency for alternative payment infrastructures. The authors find that Beijing’s efforts fall short of posing a systemic challenge to the dollar or to infrastructures like SWIFT. Nevertheless, these approaches have enabled China to use its currency for bilateral foreign policy. US and European policymakers should consider countering or attenuating these efforts, even though they have had limited success in increasing renminbi usage.
Topic:
Foreign Policy, Central Bank, Currency, Digital Currency, and SWIFT
Political Geography:
China and Asia

2. The Future of the Belt and Road in Europe: How China’s Connectivity Project is Being Reconfigured across the Old Continent – and What It Means for the Euro-Atlantic Alliance

Author:
Nicola Casarini
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
China’s Belt and Road Initiative (BRI) has entered the twilight zone in the old continent, following a deterioration of bilateral relations between the EU member states and China over the last years. Italy’s official exit from the BRI at the end of 2023 was a further blow to Chinese President Xi Jinping’s signature foreign policy. Yet, the BRI in Europe is being reconfigured rather than being terminated. In Western Europe, the BRI is moving away from physical infrastructure projects and investment in industrial assets – the latter being increasingly protected from Chinese takeovers by both national and EU legislation – to financial and monetary connectivity. This shift is welcomed by various European actors, including some policymakers at the national level, eurozone institutions and major banks. Concurrently, most of Eastern European countries continue to promote BRI projects and seek to attract Chinese investments, suggesting that there is a two-speed Europe when it comes to China, both in terms of geography and sectors.
Topic:
Infrastructure, Foreign Direct Investment, European Union, Belt and Road Initiative (BRI), and Currency
Political Geography:
China, Europe, Asia, and Italy

3. The Internationalisation of the Chinese Renminbi and China’s Digital Currency Plans

Author:
Lorenzo Bencivelli and Michele Savini Zangrandi
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
China has made major reforms to boost the international standing of its currency. The global presence of the renminbi remains contained, however. This is due to China’s economic structure (a persistent current account surplus and a partially closed financial account) and the government’s grip on the economy. China is also a Central Bank Digital Currency (CBDC) forerunner. The digital yuan (e-cny) is already active in a large scale trial. Many claim that the e-cny could provide a major boost to the internationalisation of the renminbi. However, the internationalisation of the renminbi would require major economic reforms that cannot be bypassed by the deployment of new technologies. The e-cny is therefore unlikely to boost the renminbi’s international presence. Yet, its underlying technology could be exported to other countries wishing to deploy their own-currency CBDCs. Much like with telecommunication equipment, this scenario would put China in the position of being a provider of a critical infrastructure. In the longer run, the export of e-cny technology might also facilitate the creation alternative payment networks, though this scenario is not very likely.
Topic:
Political Economy, Governance, Finance, Currency, and Digital Policy
Political Geography:
China and Asia

4. Third time lucky? China’s push to internationalise the renminbi

Author:
Alessia Amighini and Alicia Garcia-Herrero
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Western concerns that the renminbi could rival the dollar as an international currency contrast with underwhelming numbers in terms of global settlements in renminbi and with the experience of China’s two main previous failed attempts to achieve renminbi internationalisation. However, China is moving towards a more realistic plan for renminbi internationalisation, focusing on China’s strengths in trade and financing. China is now the main trading partner for a very large number of countries and has become a major creditor for a good part of the Global South. This, together with the increasingly frequent restrictions on the use of the dollar, is strengthening the renminbi. The cross-border use of the renminbi for trade settlements and financing (Chinese banks’ overseas loans denominated in renminbi and official renminbi swap lines offered by the People’s Bank of China) has been on the rise since 2022, coinciding with Russia’s invasion of Ukraine and the related Western sanctions. The increase is notable considering that the renminbi has been depreciating since January 2023 and China’s economic performance has been underwhelming. However, the use of the renminbi as investment currency has declined since 2022, in terms of both the share of foreign-exchange reserves denominated in renminbi and the share of Chinese onshore assets held by foreign investors. The current push is so far proving successful compared to previous attempts, but it remains hard to tell if China will succeed in this renewed attempt to internationalise its currency through use of its heavy weight among trading nations. Obvious constraints remain that could hold back full internationalisation of the renminbi, especially the absence of full capital account convertibility. Nevertheless, China’s somewhat heterodox approach to internationalising its currency could succeed given the ongoing placing of restrictions on use of the dollar. How the dollar, the euro or the international monetary system may be further affected by the rise of the renminbi is a major policy question that must be explored further.
Topic:
Finance, Currency, Trade, and Internationalization
Political Geography:
China and Asia

5. The Influence of the COVID-19 Pandemic on the DPRK-China Economic Ties and their Impact on the Korean Peninsula

Author:
Eun-lee Joung
Publication Date:
10-2022
Content Type:
Commentary and Analysis
Institution:
East Asia Institute (EAI)
Abstract:
In normal economies, currencies weaken in times of difficulty, but something counter-intuitive happens in North Korea. Eun-lee Joung, a research fellow at Korea Institute for National Unification claims that the value of the North Korean won appreciated, and the market prices were remarkably stable although North Korea’s economy suffered its biggest contraction during the pandemic situation. Dr. Joung states that the partial lockdown of the border between North Korea and China, and North Korea’s various changes to deal with the sanctions including the substitution of imported goods with domestic goods may have contributed to the outcome. Meanwhile, she mentions that intensifying U.S.-China strategic competition and the possibility of a prolonged conflict between Russia and Ukraine could increase North Korea’s economic reliance on China and Russia which will impede the re-establishing relations between the two Koreas. However, as the cooperation between North Korea and China in tourism has increased up before the COVID-19 outbreak, Dr. Joung highlights that Pyongyang’s tourism industry is likely to expand, which is expected to stimulate non-governmental exchange and induce North Korea toward openness.
Topic:
Economy, Currency, COVID-19, and Unification
Political Geography:
China, Asia, South Korea, and North Korea

6. Internationalization of the Korean Won in the Light of RMB Internationalization

Author:
Hyo Sang Kim, Young Sik Jeong, Ji Young Moon, and Da Young Yang
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
While China has risen to become a global superpower with a growing impact on the world economy, its currency, the Renminbi (RMB), has a limited role in the existing international financial system. China has made significant progress and will continue to push for the internationalization of the RMB, which can disrupt the global financial system, dominated by the US dollar. Under such circumstances, Korea must find a new direction for the internationalization of the Korean Won. The internationalization of the Korean won will provide new opportunities for the economy to take a further step through financial advancement.
Topic:
Economy, Currency, Internationalization, and Financial Development
Political Geography:
China, Asia, and South Korea

7. Istanbul Journal of Economics: Volume 72 Issue 2

Author:
Gökhan Karabulut
Publication Date:
06-2022
Content Type:
Journal Article
Journal:
Istanbul Journal of Economics
Institution:
Istanbul University Faculty of Economics
Abstract:
Istanbul Journal of Economics-İstanbul İktisat Dergisi is an open access, peer-reviewed, scholarly journal published two times a year in June and December. It has been an official publication of Istanbul University Faculty of Economics since 1939. The manuscripts submitted for publication in the journal must be scientific and original work in Turkish or English. Being one of the earliest peer-reviewed academic journals in Turkey in the area of economics, Istanbul Journal of Economics-İstanbul İktisat Dergisi aims to provide a forum for exploring issues in basicly economics and publish both disciplinary and multidisciplinary articles. Economics is the main scope of the journal. However, multidisciplinary and comparative approaches are encouraged as well and articles from various social science areas such as sociology of economics, history, social policy, international relations, financial studies are welcomed in this regard. The target group of the journal consists of academicians, researchers, professionals, students, related professional and academic bodies and institutions.
Topic:
Economics, Islam, Religion, Communications, Natural Resources, Finance, Internet, Economic Growth, Macroeconomics, Currency, Unemployment, Sustainability, COVID-19, BRICS, Labor Market, Economic Stability, Consumer Behavior, Rent-seeking, Energy, and Wages
Political Geography:
Europe, Turkey, and Asia

8. The Digital Asset Battlefield Between the United States and China

Author:
Michael B Greenwald
Publication Date:
12-2022
Content Type:
Journal Article
Journal:
Fletcher Security Review
Institution:
The Fletcher School, Tufts University
Abstract:
United States dollar dominance has underpinned American economic and geopolitical leadership since the Second World War. The tremendous structural and geopolitical advantages the United States derives from the hegemony of the dollar have contributed substantially to Washington’s military power, alliances, and strong hand in trade relations with other states. However, the convergence of a shifting international balance of power and the accelerated digitalization of the world economy will have major implications for this pillar of American strength.
Topic:
Geopolitics, Currency, Strategic Competition, and Digitization
Political Geography:
China, Asia, North America, and United States of America

9. Mongolia’s Currency Crisis: Made in China?

Author:
Antonio Graceffo
Publication Date:
05-2022
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
When COVID-19 lockdowns closed the People’s Republic of China’s (PRC) borders in 2020, imports entering Mongolia came to a grinding halt, leading to domestic inflation and product shortages. Exports also declined significantly, further constricting the flow of U.S. dollars into the country. More than two years later, China continues to pursue its “Zero-COVID” policy and the Russia-Ukraine war is driving up global gas and energy costs. An unwitting victim of decisions made in Beijing and Moscow, Mongolia is facing currency devaluation, high inflation, and a shortage of dollars.
Topic:
Currency, COVID-19, Economic Crisis, and Zero-COVID
Political Geography:
China, Mongolia, and Asia

10. China’s Digital Yuan: An Alternative to the Dollar-Dominated Financial System

Author:
Rajesh Bansal and Somya Singh
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Central bank digital currencies (CBDC) are digital tokens issued by central banks. In a way, they are the digital version of cash; their value is guaranteed by a central bank. Unlike money held in credit cards and mobile wallets, CBDCs are not a mere representation of physical money stored elsewhere. Instead, they are a complete replacement for currency notes. While several countries are developing their digital currencies, China is well positioned to take the lead with the digital yuan. This paper highlights ways in which China can use its digital yuan to internationalize the renminbi (RMB) and gradually chip away at the hegemony of the dollar. The first part of the paper focuses on the dollar’s dominance in the global financial system and the privileges the United States accrues as a result of the dollar being the world reserve currency. The United States has a tight grip on the world’s payment rails, especially in the case of cross-border transactions. For example, the Society for Worldwide Interbank Financial Telecommunications (SWIFT)—the largest cross-border payment clearinghouse in the world—has to comply with and implement unilateral U.S. sanctions. These sanctions seriously hinder trade and damage the economies of the countries affected by them, as was the case with Iran, which lost $150 billion worth of revenue as a result of U.S. sanctions.1 Once a country is cut off from SWIFT’s network, it becomes extremely difficult for it to trade with the rest of the world. Thus, via the dollar’s dominance and its geopolitical muscle, the United States is positioned to maintain a tight grip on the world’s financial system. In an increasingly multipolar world, this outdated, decades-old system of the dollar as the apex currency and the United States’ position of power that allows it to pursue its own geopolitical interests has become outdated. The U.S. dollar’s hegemony has been challenged by economies like those of the European Union (EU), Russia, and China. Of all the countries, China finds itself in a dominant position to gain from this transition. In order to challenge the dollar’s hegemony and internationalize its currency, China will have to move away not just from the dollar but also from the payment rails dominated by the dollar. The best way to simultaneously do both would be to introduce a new payment rail like CBDCs. This paper analyses the way the launch of China’s CBDCs could greatly enhance its currency internationalization prospects. Considering China’s growing economy and influence over the world, the paper argues that China’s CBDC launch could bring a period of momentous change in the global financial system. In order to challenge the dollar, China will have to build the payments infrastructure required to facilitate the use of its digital yuan. It will also have to incentivize other countries to adopt its digital currency. China’s ability to successfully promote its currency using CBDCs will depend heavily on the country’s ability to relax capital controls and maintain the world’s trust in its institutions. China’s geopolitics will play a key role here. In the last decade, some of China’s major geopolitical efforts have set the stage for its CBDC launch. As China continues to use its foreign policy and technological capabilities to grow its influence in the global financial system, the launch of the digital yuan could be a significant step forward in this direction. This paper examines the reasons for China’s past efforts at currency dominance and explores ways in which the country can use its CBDC to further internationalize its digital yuan.
Topic:
Foreign Policy, Finance, Economy, Central Bank, and Currency
Political Geography:
China and Asia