<scp>C</scp>hina's Monetary Power: Internationalization of the <scp>R</scp>enminbi

Abstract

This paper sheds light on the C hinese government's recent efforts to internationalize the R enminbi ( RMB ). C hina's standing as the world's second largest economy and its more than $3.9 trillion in foreign exchange reserves could greatly leverage C hina's monetary power. As the U nited S tates has become heavily dependent on C hinese financial support in the wake of the recent financial crisis, C hina has sought to exploit this financial advantage. C hina may seek to influence decision‐making on matters relating to future reorganization of the international monetary system. Were the RMB to become a global currency, the status of the dollar as the world's top currency would be undermined and US hegemony in the international political economy potentially challenged. However, the intent of C hinese policy‐makers is not to replace the top currency status of the U nited S tates, but rather to increase C hinese policy autonomy. Since internationalization of the RMB requires a massive financial liberalization of C hina's domestic economy and further might threaten the vested interests of domestic groups, C hina has pursued internationalization of the RMB by a two‐track global and regional strategy in a gradual manner.