2015 Fiscal Year Research-status Report
Internationalization of the Chinese Renminbi: A Political Study of Currency Internationalization
| Project/Area Number |
26380206
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| Research Institution | National Graduate Institute for Policy Studies |
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Principal Investigator |
CHEY Hyoung・kyu 政策研究大学院大学, 政策研究科, 准教授 (20626999)
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| Project Period (FY) |
2014-04-01 – 2018-03-31
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| Keywords | 長すぎて入らない / international currency |
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| Outline of Annual Research Achievements |
I have completed my research on the use of the renminbi (RMB) in South Korea. It has found that sustainable indigenous market forces facilitating RMB use in South Korea remain weak, despite the country’s close economic ties with China. It has also shown, however, that the South Korean Government has itself recently been able, through its policy measures, to generate new domestic support for greater use of the RMB. These findings ultimately highlight the significant impact on the internationalization of a currency of the politics in the foreign countries using it.
Expanding the study of the South Korean case, I also have analyzed RMB use in the world by employing a large-N study, with a particular focus on the question of who are the first users of the RMB. This research has found that a state’s hosting a major global financial center leads to greater likelihood of its supporting the use of a newly-emerging international currency. It shows as well significant impacts on a state’s use of international currencies stemming from its institutional economic cooperation and its security ties with international currency-issuing states.
In addition, my research on the preferences and the roles of the People’s Bank of China regarding the internationalization of the RMB has been largely completed. This study shows that a central bank with weak monetary policy autonomy and low independence is more likely to support the internationalization of its country’s currency.
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| Current Status of Research Progress |
Current Status of Research Progress
2: Research has progressed on the whole more than it was originally planned.
Reason
My initial plan was to analyze RMB internationalization in mainland China and Hong Kong in FY2014 and to examine the roles of offshore RMB markets (other than Hong Kong) in internationalization of the RMB in FY2015.
As initially planned, my research has examined RMB internationalization in mainland China, focusing mainly on the People’s Bank of China, which has been one of the most enthusiastic domestic supporters in China for RMB internationalization. It has addressed the policies that the Bank has introduced in order to promote RMB internationalization and also why the Bank has supported it.
Also, as initially planned, I have addressed the use of the RMB in Hong Kong and other offshore financial centers, and their roles in RMB internationalization, finding that a state’s hosting a major global financial center has shown strong support for the use of the RMB in its jurisdiction.
In addition, going beyond the initial plan, my research has been able to investigate RMB use in South Korea by conducting an in-depth case study on the country, and, also, to analyze RMB use in the world by adopting a large-N study.
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| Strategy for Future Research Activity |
In FY 2016, expanding my research in the previous year, I plan to further develop my study of the use of the RMB in the world. The main method may be a comparative study that analyzes RMB uses in major countries, such as Japan, South Korea, the United Kingdom and the United States. I will first analyze the degree of use of the RMB in each of the case countries addressed, and then compare them to determine the countries in which use of the RMB is higher/lower. Thereafter I will address the factors that have led to the differences in degrees of RMB use between those countries. In this regard, both the private and public sectors will be addressed.
I also am considering to analyze which financial institutions are more likely to engage in RMB businesses, if necessary data is available.
In addition, I plan to expand my research on the preferences of the central bank regarding the internationalization of its country’s currency, going beyond the case of the People’s Bank of China. I am to compare the Chinese case with other important cases, such as the Eurozone, Japan and major emerging economies. This comparative study is expected to help develop more generalizable arguments with relation to the preferences of the central bank regarding the internationalization of its country’s currency.
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