Rising currency: The charge of the renminbi

China hopes to one day challenge the dollar’s dominance

The World Today
2 minute READ

Dr Paola Subacchi

Former Research Director, International Economics

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.

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