Shifting forces behind RMB internationalization: evidence from the 2025 Triennial Survey
Summary
Focus
We investigate the factors driving the internationalisation of the Chinese renminbi (RMB) in global currency trading, using data from the 2025 BIS Triennial Survey. We explore both short-term trading growth and long-term geographical distribution of RMB trading. We study the role played by bilateral trade and financial links with China, as well as policy-driven variables. We also examine unique trading dynamics in Asian financial centres, and differences between spot and derivatives trading.
Contribution
Our paper addresses two major gaps in understanding the forces behind RMB internationalisation. First, in explaining RMB trading growth across jurisdictions, prior studies have struggled to identify sizeable effects of real or financial links with China, beyond the dominance of market-driven "convergence", whereby RMB trading adjusts based on its under- or over-representation in total currency trading in a given location. Our study takes advantage of several data sets not used in earlier research on the topic to fill this gap. We use more deeply disaggregated and detailed BIS Triennial Survey data, including a distinction between local and cross-border trades and a distinction across instruments. We also draw on the restricted BIS locational banking statistics and the BIS international debt securities statistics. Second, in a departure from recent research on RMB internationalisation in a similar empirical setting using BIS Triennial Survey data, we distinguish between short-term growth dynamics and long-term levels of RMB trading.
Findings
We find that financial factors, particularly banking links with China and policy-driven measures, such as qualified investor licences, are key drivers of RMB internationalisation, more so than trade-related factors. In the short term, cross-border banking links with China explain much of RMB trading growth. This reinforces the market-driven "convergence" dynamics, although we find they are slower than previously reported. Some unique dynamics are also observed in Hong Kong SAR and Singapore, driven primarily by FX swap trading. Over the longer run, the role of both real and financial links with China is more evident. Here, the effects of policy-relevant factors, such as free trade agreements and issuances of qualified investor licences – which may take time beyond the three-year interval of Triennial Surveys to fully materialise – are clearly identifiable.
Abstract
This paper explores factors driving the internationalization of Renminbi (RMB) trading, using data from the 2025 BIS Triennial Survey of global foreign exchange turnover. We analyze both short-term (three-year) trading growth and long-term RMB turnover levels across jurisdictions. Unlike recent studies that struggled to identify sizable effects of real or financial links with China, we find that financial factors, especially banking links with China, play a key role, even over short horizons. These financial links reinforce market-driven "convergence" patterns, whereby RMB trading adjusts based on its under- or over-representation in total currency trading in a given location. However, this convergence is slower than previously reported, while financial drivers have grown in importance. For the long-term geographical distribution of RMB trading, financial links with China, including policy-driven variables such as qualified investor licenses, dominate, though trade links also contribute significantly. We also find that bilateral trade effects are stronger for cross-border RMB trading, and we report new insights on the dynamics in Asian financial centers and trading in spot versus derivatives.
JEL classification: F31, F33, G15, G18
Keywords: geography of currency trading, foreign exchange, renminbi internationalization, cross-border banking
