RMB Internationalization
A Fragile Impetus in the Global Monetary Order and the Dilemma of Regional Leadership
DOI:
https://doi.org/10.22151/politikon.56.1Keywords:
Monetary Power, Hegemony, Integration, China, US Dollar, Internationalization of the RenminbiAbstract
The internationalization of the renminbi (RMB) is viewed by some experts as a potential challenge to the US dollar's (USD) hegemonic status in the current global monetary system. This study employs a mixed theoretical framework to delve into the prospective evolution of China’s monetary influence. By applying the power transition theory to analyze the global monetary power structure, this study evaluates China’s dissatisfaction as a potential challenger against the dominance of the USD and examines the power parity between China and the United States. On a regional scale, the analysis focuses on possible Asian monetary integration of the RMB-domination by adopting the neofunctionalist paradigm derived from the European experience and juxtaposing this process with European monetary integration. The analysis shows that China has not been able to directly challenge the dominance of the USD, nor has it effectively spearheaded the agenda for regional monetary integration. More specifically, China’s export-oriented growth model has hindered the emergence of the RMB as a substantial competition to the USD within East and South Asia.
References
Abdullahi, Mohammed Ahmed. 2019. “China’s Bilateral Currency Swap Agreement: Strategic Move to Foster Political and Financial Hegemony.” Munich Personal RePEc Archive, p. 3. https://mpra.ub.uni-muenchen.de/109879/
Ahn, Changmo, Hong-Bum. Kim and Dongkoo. Chang. 2006. “Is East Asia fit for an Optimum Currency Area? An Assessment of the Economic Feasibility of a Higher Degree of Monetary Cooperation in East Asia: is East Asia Fit for an Optimum Currency Area?” The Developing Economies 44, no. 3: 288–305. https://doi.org/10.1111/j.1746-1049.2006.00018.x.
AIIB. 2021. “The 2021 AIIB Annual Report.” Beijing. p.9 and p.12 https://www.aiib.org/en/news-events/annual-report/2021/home/index.html
AIIB. 2023. “Private Capital Mobilisation.” Beijing. https://www.aiib.org/en/about-aiib/who-we-are/infrastructure-for-tomorrow/private-capital-mobilization/index.html
Aizenman, Joshua, Yothin . Jinjarak and Donghyun. Park. 2011. “International Reserves and Swap Lines: Substitutes or Complements?”, International Review of Economics & Finance 20, no. 1: 5–18. https://doi.org/10.1016/j.iref.2010.07.002.
Alwago, Wycliffe Obwori. 2022. “Is the Renminbi a Global Currency in the Making? Globalization of Digital Yuan.’ Pénzügyi Szemle = Public Finance Quarterly 67, no. 4: 553–566. https://doi.org/10.35551/PFQ_2022_4_5.
Bank for International Settlements. 2003. “Lee Hsien Loong: Remaking the Singapore Economy.” https://www.bis.org/review/r030428d.pdf
Central Committee of CCP and the State Council of the People’s Republic China. 2023. “Programme for Party and State Institutional Reform.” Beijing. http://www.gov.cn/zhengce/2023-03/16/content_5747072.htm.
Chandrasekhar, C, P. and Jayati. Ghosh. 2020. “Bilateral Swaps in China’s Global Presence.” https://www.networkideas.org/featured-articles/2020/12/bilateral-swaps/Cheung, Yin-Wong. 2021. “A Decade of RMB Internationalisation.” Economic and Political Studies: 1–28. https://doi.org/10.1080/20954816.2021.1996938.
Chey, Hyoung-kyu. 2009. “A Political Economic Critique on the Theory of Optimum Currency Areas, and the Implications for East Asia.” World Economy 32, no. 12: 1685–1705. https://doi.org/10.1111/j.1467-9701.2009.01200.x.
Cohen, Benjamin. 2009. “Dollar Dominance, Euro Aspirations: Recipe for Discord?” JCMS: Journal of Common Market Studies 47, no. 4: 741–766. https://doi.org/10.1111/j.1468-5965.2009.02003.x.
Cohen, Benjamin. 2013. “Currency and State Power.” In Back to Basics: State Power in a Contemporary World, edited by M. Finnemore and J. Goldstein, 169. New York, NY: Oxford University Press.
De Grauwe, Paul. and Zhaoyong, Zhang. 2012. “Monetary Integration and Exchange Rate Issues in East Asia.” The World Economy 35, no. 4: 397–404. https://doi.org/10.1111/j.1467-9701.2012.01442.x.
Desai, Radhika. 2020. “Marx’s Critical Political Economy, ‘Marxist Economics’ and Actually Occurring Revolutions Against Capitalism.” Third World Quarterly 41, no. 8: 1353-1370. DOI: 10.1080/01436597.2020.1741346.
Eichengreen, Barry and Domenico Lombardi. 2017. “RMBI or RMBR? Is the Renminbi Destined to Become a Global or Regional Currency?” Asian Economic Papers 16, no. 1: 35–59. https://doi.org/10.1162/ASEP_a_00483.
European Central Bank. 2022. “ECB and People’s Bank of China Extend Bilateral Euro-Renminbi Currency Swap Arrangement.” Frankfurt. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr221010~29cab889cf.en.html
Gavris, Maria. 2021. “Revisiting the Fallacies in Hegemonic Stability Theory in Light of the 2007–2008 Crisis: The Theory’s Hollow Conceptualization of Hegemony.” Review of International Political Economy 28, no. 3: 739–760. https://doi.org/10.1080/09692290.2019.1701061.
Germain, Randall and Herman Schwartz. 2014. “The Political Economy of Failure: The Euro as an International Currency.” Review of International Political Economy 21, no. 5: 1095–1122. https://doi.org/10.1080/09692290.2014.891242.
Graham, Euan. 2013. “Southeast Asia in the US Rebalance: Perceptions from a Divided Region.” Contemporary Southeast Asia 35, no. 3: 305. https://doi.org/10.1355/cs35-3a.
Haas, Ernst. 1958. The Uniting of Europe. Political, Social, and Economic Forces, 1950-1957. 2nd ed. Stanford: Stanford University Press.
Haas, Ernst. 1961. “International Integration: The European and the Universal Process.” International Organisation 15.
Hamilton-Hart, Natasha. 2014. “Monetary Politics in Southeast Asia: External Imbalances in Regional Context.” New Political Economy 19, no. 6: 872–894. https://doi.org/10.1080/13563467.2013.861410.
Hao, Kaixuan, Liyan Han, and (Tony) Wei Li. 2022. “The Impact of China’s Currency Swap Lines on Bilateral Trade.” International Review of Economics & Finance 81: 173–183. https://doi.org/10.1016/j.iref.2022.05.004.
Helleiner, Eric. 1994. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca: Cornell University Press.
Horn, Sebastian, Bradley, Parks, Carmen Reinhart and Christoph Trebesch. 2023. “China as an International Lender of Last Resort.” Working Paper #124. Williamsburg, VA: AidData at William & Mary, pp. 15-16. https://docs.aiddata.org/ad4/pdfs/WPS124_China_as_an_International_Lender_of_Last_Resort.pdf
Ikenberry, John. 2005. “Power and Liberal Order: America’s Postwar World Order in Transition.” International Relations of the Asia-Pacific 5, no. 2: 133–152. https://doi.org/10.1093/irap/lci112.
International Capital Market Association (ICMA). 2022. “The Asian International Bond Markets: Development and Trends.” Zurich. https://www.icmagroup.org/assets/documents/The-Asian-International-Bond-Markets-Developments-and-Trends-English-March-2022.pdf?vid=2
International Monetary Fund (IMF). 2023a. “Currency Composition of Official Foreign Exchange Reserves.” https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4.
International Monetary Fund (IMF). 2023b. “Special Drawing Rights (SDR).” https://www.imf.org/en/About/Factsheets/Sheets/2023/special-drawing-rights-sdr.
Katada, Saori. 2008. “From a Supporter to a Challenger? Japan’s Currency Leadership in Dollar-dominated East Asia.” Review of International Political Economy 15, no. 3: 399–417. https://doi.org/10.1080/09692290801928756.
Katada, Saori. 2017. “In Pursuit of Stability: Evolution of Asia’s Regional Financial Architecture.” The Pacific Review 30, no. 6: 910–922. https://doi.org/10.1080/09512748.2017.1307873.
Kindleberger, Charles. 1973. The World in Depression 1929-1939. Berkeley: University of California Press. Volume 4.
Lee, Grace and Mohamed Azali. 2012. “Is East Asia an Optimum Currency Area?” Economic Modelling 29, no. 2: 87–95. https://doi.org/10.1016/j.econmod.2011.05.006.
Lee, Grace and Sharon Koh. 2012. “The Prospects of a Monetary Union in East Asia.” Economic Modelling 29, no. 2: 96–102. https://doi.org/10.1016/j.econmod.2011.06.022.
Lemke, Douglas. 1996. “Small States and War: An Expansion of Power Transition Theory.” In Parity and War: Evaluations and Extensions of the War Ledger, edited by J. Kugler & D. Lemke, 77–92. Michigan University Press.
Lemke, Douglas. 2002. Regions of War and Peace. Cambridge: Cambridge University Press.
Lindberg, Leon. N. 1966. “Integration as a Source of Stress on the European Community.” International Organization 19, no. 1.
Ministry of Foreign Affairs of the PRC. 2023. “US Hegemony and its Perils.” Beijing. https://www.fmprc.gov.cn/eng/wjbxw/202302/t20230220_11027664.html
Moul, William. 2003. “Power Parity, Preponderance, and War between Great Powers, 1816-1989.” Journal of Conflict Resolution 47, no. 4: 468–489. https://doi.org/10.1177/0022002703252980.
Mundell, Robert A. 1961. “A Theory of Optimum Currency Areas.” The American Economic Review 51, no. 4: 567.
Mutimer, David. 1989. “1992 and the Political Integration of Europe: Neofunctionalism Reconsidered.” Journal of European Integration 13, no. 4. https://www.tandfonline.com/doi/abs/10.1080/07036338908428938
Niemann, Arne and Demosthenes Ioannou. 2015. “European Economic Integration in Times of Crisis: A Case of Neofunctionalism?” Journal of European Public Policy 22, no. 2: 196–218. Available at: https://doi.org/10.1080/13501763.2014.994021.
Organski, Abramo Fimo Kenneth. 1958. World Politics. 2nd ed. New York: Alfred A. Knop.
Patrício Ferreira Lima, Karina. (2022) “Sovereign Solvency as Monetary Power.” Journal of International Economic Law 25, no. 3: 424–446. https://doi.org/10.1093/jiel/jgac029.
Polivach, Alexander. 2020. “International Role of Euro and European Integration.” World Eсonomy and International Relations 64, no. 5: 33-41. https://doi.org/10.20542/0131-2227-2020-64-5-33-41.
Przeworski, Adam. 1991. “Transitions to Democracy.” In Democracy and the Market: Political and Economic Reforms in Eastern Europe and Latin America, 59. Cambridge: Cambridge University Press (Studies in Rationality and Social Change) doi: 10.1017/CBO9781139172493.004.
Quah, Chee-Heong. 2012. “Is East Asia as Prepared as Eurozone for Monetary Union?” Journal of Business Economics and Management 13, no. 3: 471–488. https://doi.org/10.3846/16111699.2011.620136.
Rapkin, David. 2001. “The United States, Japan, and the Power to Bloc: The APEC and AMF Cases.” The Pacific Review 14, no. 3: 373–410.
Ravenhill, John. 2020. Global Political Economy. 6th ed. Oxford: Oxford University Press.
Rosamond, Ben. 2000. Theories of European Integration. London: Palgrave.
Russett, B Bruce. and Starr. Harvey. 1992. World Politics: The Menu for Choice. 4th ed. New York: Freeman.
Sattar, Abdul, Temesgen Hordofa Tolassa, Muhammad Noshab Hussain, and Muhammad Ilyas. 2022. “Environmental Effects of China’s Overseas Direct Investment in South Asia.” SAGE Open 12, no. 1: 16. https://doi.org/10.1177/21582440221078301.
Schmitter, Philippe. 1971. “A Revised Theory of European Integration.” In Regional Integration: Theory and Research, edited by L.N. Lindberg , Leonand S.A. Scheingold, Stuart. Cambridge, MA: Harvard University Press.
Siddiqui, Kalim. 2021. “The Bilateral Swap Agreements, Chinese Currency, and the Demise of the US Dollar.” World Financial review. https://worldfinancialreview.com/the-bilateral-swap-agreements-chinese-currency-and-the-demise-of-the-us-dollar/
Simes, Dimitri. 2020. “China and Russia Ditch the Dollar in a Move Towards a ‘Financial Alliance’.” Financial Times 17.
Siripurapu, Anshu and Noah Berman. 2022. “The Contentious U.S.-China Trade Relationship.” https://www.cfr.org/backgrounder/contentious-us-china-trade-relationship.
Solís, Mireya and Jeffrey Wilson. 2017. “From APEC to Mega-regionals: The Evolution of the Asia-Pacific Trade Architecture.” The Pacific Review 30, no. 6: 923–937. https://doi.org/10.1080/09512748.2017.1305438.
State Council of the PRC. 2008. “Order No.532 of the State Council of the People’s Republic of China.” http://www.lawinfochina.com/display.aspx?lib=law&id=6970.
Tammen, Ronald., Jacek. Kugler and Douglas. Lemke. 2017. Foundations of Power Transition Theory. Oxford University Press. https://doi.org/10.1093/acrefore/9780190228637.013.296.
US Department of the Treasury. 2019. “Treasury Designates China as a Currency Manipulator.” Washington. https://home.treasury.gov/news/press-releases/sm751
Vermeiren, Mattias. 2010. “The Global Imbalances and the Contradictions of US Monetary Hegemony.” Journal of International Relations and Development 13, no. 2: 105–135. https://doi.org/10.1057/jird.2009.36.
Vermeiren, Mattias. 2013. “Foreign Exchange Accumulation and the Entrapment of Chinese Monetary Power: Towards a Balanced Growth Regime?” New Political Economy 18, no. 5: 680–714. https://doi.org/10.1080/13563467.2013.736958.
Wang, Peijie. and Wang, Ping. 2022. “Emerging Influence of RMB on Currency Markets in a Transpiring Tri-polar IMS.” International Journal of Finance and Economics: 20. https://doi-org.ezproxy.is.ed.ac.uk/10.1002/ijfe.2693
Watanabe, Shingo and Masanobu Ogura. 2010. “How Far Apart are the Two ACUs from Each Other? Asian Currency Unit and Asian Currency Union.” Emerging Markets Review 11, no. 2: 152–172. https://doi.org/10.1016/j.ememar.2010.01.001
Webb, Michael. 1995. The Political Economy of Policy Coordination: International Adjustment Since 1945. Ithaca: Cornell University Press.
White House. 2022. “Indo-Pacific Strategy of the United States.” Washington: Executive Office of the President, National Security Council.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Politikon: The IAPSS Journal of Political Science
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.