We empirically characterize how China is internationalizing the Renminbi by staggering the entry of different types of foreign investors into its domestic bond market and propose a dynamic reputation model to explain this strategy. Our framework rationalize China’s strategy as trying to build credibility as an international currency issuer while reducing the cost of capital flight. We provide a sufficient statistic to measure countries' reputation over time and show that it can be estimated using micro data on foreign investors' portfolios. We use our framework to explore how countries compete to become a reserve currency provider.

Since September 1, 2014, the renminbi (RMB) offshore market in Taiwan has been started on according a cross-strait MOU. A completed RMB market in the Chinese Economic Area therefore has been established. Due to political and economic disruptions, such as the aftermath of the global tsunami, mainland China’s stock market crash and RMB exchange rate reform in 2015, as well as failure of the Service Trade Agreement between Taiwan and mainland China in 2016, the arbitrage opportunities among the three RMB markets can be explored. This paper evaluates the convergence and divergence of RMB market returns by the sigma-convergence (or log t) test, which provides a more precise indication for market return convergence than does the traditional unit root test. Policy implications for the RMB arbitrage are also provided.

This article provides a detailed introduction to China’s launching of a digital currency. We conduct a comparative analysis concerning whether digital currency is a more stable and reliable currency than cryptocurrency and investigate whether a digital renminbi (or yuan) could replace the US dollar as a medium of exchange in international transactions. China has gained a first-mover advantage by rolling out a central bank digital currency (CBDC). But the outcome will depend on the US response as well as the future evolution of the US and Chinese economies. Most other articles on this topic focus on domestic use of the Chinese CBDC. But this study is unique in analyzing the prospects of a digital renminbi as a replacement for the US dollar in international commerce.

This article provides a detailed introduction to China’s launching of a digital currency. We conduct a comparative analysis concerning whether digital currency is a more stable and reliable currency than cryptocurrency and investigate whether a digital renminbi (or yuan) could replace the US dollar as a medium of exchange in international transactions. China has gained a first-mover advantage by rolling out a central bank digital currency (CBDC). But the outcome will depend on the US response as well as the future evolution of the US and Chinese economies. Most other articles on this topic focus on domestic use of the Chinese CBDC. But this study is unique in analyzing the prospects of a digital renminbi as a replacement for the US dollar in international commerce.

　　　计价货币（Invoice Currency）是国际货币(International Currency)在私人部门作为价值基础的重要职能，其在国际贸易中的结算比率也是判断某种货币国际化程度的重要指标之一。本文根据既有的计价货币选择理论，在对96家江苏省出口企业进行问卷调查的基础上，通过构建Probit个体二分变量计量模型，在价格政策制定这一微观层面上对企业以人民币计价出口的决定要因进行了详细的实证研究。实证分析表明：企业类型为跨国公司关联企业或出口加工型企业、企业出口产品为半成品的，与企业以人民币计价出口呈显著或较为显著的正相关关系；而企业出口地为美国或欧元区国家以及其他发达国家的，则与之呈较为显著的负相关关系。这一结果表明：从促进人民币国际化的角度来看，有必要进一步开放人民币的资本项目的管制，方便跨国公司一类企业进行一定的人民币理财活动，促使其使用人民币计价结算。此外，在货币之间的国际化及国际货币化是否存在有排他性竞争关系明确之前，有必要对其他国家货币的国际化或国际货币化保持警惕。 Invoice Currency is one of the important functions of international currency as a value basis in the private sector。The ratio of one currency as a settlement currency in international trade is also an important index of its degree of internationalization. According to the existing theories of the invoicing currency choice，and on the basis of a questionnaire survey of 96 export enterprises in Jiangsu Province, this paper builds a bivariate probit model with sample selection. From the perspective of price policy making, this article carries out a detailed empirical study on the determinants of the enterprises in RMB-denominated export. The empirical analysis shows that some enterprises have significant positive correlation with RMB-denominated export while others have negative correlation. The formers are enterprises with types of multinational affiliates or export processing enterprises, and with exporting products of the semi-finished products; while the latters are enterprises exporting to the United States, the euro-zone countries or other developed countries. This result suggests that when considering promoting the internationalization of the RMB, the capital control in China should be further released. Therefore, if multinational enterprises could carry out RMB financing, they would promote the use of RMB in trade invoicing and as a settlement currency. In addition, it's not clear whether an exclusive competition exists between the currencies that are in their paths of internationalization and becoming an international currencies. So, it's necessary to remain vigilant on other countries' currency internationalization or the internationalization of the currency.

随着跨境贸易人民币结算试点工作扩大至全国范围，学术界对“人民币国际化”问题的讨论也日趋热烈。但值得注意的是，众多的意见和观点并未对货币的“国际化”与“国际货币化”这两个不同的概念加以区别。本文通过对国际货币所应具有的六项职能的分析，指出了货币的“国际化”与“国际货币化”这两者的差异，并且通过对日本政府的所谓“日元国际化”相关一系列文件以及日元朝向国际货币发展历程的回顾和分析，指出目前日元国际货币化的挫折，很大程度上是日本政府长期模糊“货币国际化”与“国际货币化”这两者概念、消极应对日元发展成为国际货币的结果。最后，本文根据中日两国当前金融及货币、资本市场政策的比较，指出人民币今后将长期处于提高其国际影响力——即“国际化”的阶段，并据此提出了人民币“国际化”和“国际货币化”这两个不同进程的目标设想。 with the development of the strategy of “Going Global” with Renminbi, the relative research in academe is becoming more and more. However, in many views and papers, the concepts of “currency internationalization” and “becoming an international currency” are not distinguished from each other. This paper indicates the difference between them by an analysis on 6 functions of the “international currency”. Then, by the reviews of Japanese government’s documents about so-called “internationalization of Japanese Yen” and the Japanese Yen’s process of becoming an international currency, this article argues that the present frustration that Japanese Yen becomes an international currency is the consequence of the former Japanese government’s long-term resistances by casting a mist on it’s definitions of “currency internationalization” and “becoming an international currency”. Finally, based on a comparison of China’s financial, monetary and capital market’s policies with Japan’s , this paper indicates that Renminbi will be in a long-term stage of “currency internationalization”, namely, in the stage of increasing international influence, and concisely brings forward a line of internationalization and becoming an international currency for Renminbi.

We examine the impact of renminbi revaluation on foreign firm valuations, considering two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010 and employing data on some 6,000 firms in 44 economies. Stock returns rise with renminbi revaluation expectations. This reaction appears to reflect a combination of improvements in general market sentiment and specific trade effects. Expected renminbi appreciation has a positive effect on firms exporting to China but a negative impact on those providing inputs for the country’s processing exports. Stock prices rise for firms competing with China in their home market but fall for firms importing Chinese products with large imported-input content. There is also some evidence that expected renminbi appreciation reduces the valuation of financially-constrained firms, presumably because appreciation implies reduced Chinese purchases of foreign securities. The results carry over when we consider ten instances of market-perceived changes in prospective Chinese currency policy.

This paper examines the impact of renminbi revaluation on foreign firm valuation and, by implication, firm prospects. To deal with the potential endogeneity of exchange rate movements, we consider not just official announcements of exchange rate policy but also 27 instances of market-perceived changes in China’s currency policy driven by domestic or foreign political pressure. Using information on 12,300 firms in 44 countries, we find that stock returns increased with renminbi revaluation expectations. This reaction was related as much to improved market sentiment as to specific trade channels, however. In terms of trade channels, we find that expectations of renminbi appreciation reduce the relative stock returns of firms providing components and raw materials to China as inputs for the country’s exports. There is also some evidence that expectations of renminbi appreciation reduce the stock prices of financiallyconstrained firms.

This paper examines the impact of renminbi revaluation on foreign firm valuation and, by implication, firm prospects. To deal with the potential endogeneity of exchange rate movements, we consider not just official announcements of exchange rate policy but also 27 instances of market-perceived changes in China’s currency policy driven by domestic or foreign political pressure. Using information on 12,300 firms in 44 countries, we find that stock returns increased with renminbi revaluation expectations. This reaction was related as much to improved market sentiment as to specific trade channels, however. In terms of trade channels, we find that expectations of renminbi appreciation reduce the relative stock returns of firms providing components and raw materials to China as inputs for the country’s exports. There is also some evidence that expectations of renminbi appreciation reduce the stock prices of financiallyconstrained firms.

We examine whether the Chinese exchange rate is misaligned and how Chinese trade flows respond to the exchange rate and to economic activity. We find, first, that the Chinese currency, the renminbi (RMB), is substantially below the value predicted by estimates based upon a cross-country sample, when using the 2006 vintage of the World Development Indicators. The economic magnitude of the mis-alignment is substantial -- on the order of 50 percent in log terms. However, the misalignment is typically not statistically significant, in the sense of being more than two standard errors away from the conditional mean. Moreover, this finding disappears completely when using the most recent 2008 vintage of data; then the estimated undervaluation is on the order of 10 percent. Second, we find that Chinese multilateral trade flows respond to relative prices -- as represented by a trade weighted exchange rate -- but the relationship is not always precisely estimated. In addition, the direction of the effects is sometimes different from what is expected a priori. For instance, Chinese ordinary imports actually rise in response to a RMB depreciation; however, Chinese exports appear to respond to RMB depreciation in the expected manner, as long as a supply variable is included. In that sense, Chinese trade is not exceptional. Furthermore, Chinese trade with the United States appears to behave in a standard manner -- especially after the expansion in the Chinese manufacturing capital stock is accounted for. Thus, the China-US trade balance should respond to real exchange rate and relative income movements in the anticipated manner. However, in neither the case of multilateral nor bilateral trade flows should one expect quantitatively large effects arising from exchange rate changes. And, of course, these results are not informative with regard to the question of how a change in the RMB/USD exchange rate would affect the overall US trade deficit.