8 Currencies

Marques

RMB usage has been boosted not only by Chinese statecraft but also by economic actors’ recent difficulties in using the dollar. The American financial sanctions against Chinese trade partners, the cyclical instability of international finance, as well as peripheral countries’ low inflows of dollars have encouraged firms and banks to use the renminbi as an alternative to the dollar. In addition to contributing to a broader understanding of the drivers of currency internationalization, this article proposes a model that explains the mechanisms that push firms and banks away from the incumbent international currency. I posit that changes in domestic and international conditions influence currency transaction costs, thereby propelling economic actors to increase their use of currencies with relatively lower transaction costs.

Marques (2021) Financial Statecraft - Renminbi Internationalization (pdf)