RMB internationalization driven by financial links, study finds
A new BIS working paper reveals that financial factors, particularly banking links with China, are the primary drivers of Renminbi (RMB) internationalization. The study uses data from the 2025 BIS Triennial Survey to analyze short-term growth and long-term turnover levels across jurisdictions.
Financial ties outweigh market convergence
The paper challenges previous findings by demonstrating that financial factors, especially cross-border banking links with China, play a key role in RMB trading, even over short horizons.
Unlike earlier studies that found limited effects of real or financial links, this research identifies a stronger influence of financial drivers, reinforcing market-driven 'convergence' patterns.
This convergence, where RMB trading adjusts based on its under- or over-representation, is slower than previously reported.
The authors utilized deeply disaggregated BIS Triennial Survey data, including distinctions between local and cross-border trades and various instruments, alongside restricted BIS international banking and debt securities statistics.
These enhanced datasets allowed for a more nuanced understanding of the economic forces shaping RMB internationalization and how they have evolved since previous surveys.
The findings suggest a growing importance of financial links, consistent with the rapid expansion of Chinese banks' cross-border activity and recent discussions in the financial press regarding de-dollarisation efforts.
This shift indicates a more pronounced role for policy-driven financial integration in the currency's global reach.
Asian hubs and policy's long-term influence
The study identifies unique RMB growth dynamics in Hong Kong SAR and Singapore, two key Asian trading centers.
Despite the RMB being overrepresented in these centers in the 2022 survey, its share continued to increase.
Hong Kong SAR serves as a gateway to mainland capital markets, while Singapore functions as a major FX hub for asset managers and speculative traders.
These centers exhibit statistical outlier properties, significantly impacting the overall convergence pattern of RMB trading growth in other jurisdictions.
In the long run, financial drivers, including banking links with China and the number of qualified investor (QFI) licenses, dominate the geographical distribution of RMB trading, explaining over 80 percent of the variation across trading centers.
For instance, a one percent higher share of China in a jurisdiction's international trade leads to up to a 0.7 percent higher share of RMB in the local FX market.
Policy-driven variables, such as the opening of clearing banks and historical investment quotas, also played a role, occasionally supported by swap-lines.
The influence of financial factors is particularly strong in RMB derivatives trading, such as outright forwards and FX swaps, and has increased since the 2022 survey, reflecting a general trend towards financial use of currencies and hedging during market turbulence.
Policy's long shadow on RMB's global reach
This study provides crucial evidence that policy-driven financial links now overshadow pure market forces in RMB internationalization.
While the findings are robust, they highlight a potential shift towards state-directed currency development, raising questions about genuine market integration.
Future research should critically examine the long-term implications of this policy influence on global financial architecture.