What actually is the renminbi? Recent financial volatility seems to suggest that the Chinese currency has become a significant player in international finance. After all, it can move international markets. The cut in its daily reference rate by 1.9 per cent in August – allegedly to make it more market-driven – sent shockwaves through the world’s stock exchanges.
Yet the renminbi remains a non-convertible currency with limited circulation outside China, underscoring an unprecedented situation in which China is the world’s second largest economy and biggest exporter, yet lacks a currency that fully reflects this role.
The world’s largest economies – the United States, Europe and Japan – all have currencies with extensive international use, both to invoice and settle trade deals and to store value.