RMB internationalization: how far has it gone and what should China do

The objective of this study is to explore how far the internationalization of the RMB has gone so far and what the Chinese government must do to support the internationalization path. This paper analyzes three important aspects of this issue: the dimensions and function of an international currency, the costs and benefits of internationalizing a currency, and China's economic problems that are likely to influence the outcome of internationalization. If the benefits that the internationalization of the RMB are expected to bring to China may be offset by costs, the government needs to balance the challenges and costs against the benefits. Finally it concludes that China should be cautious about exposing its economy to dramatic shocks or excessive vulnerability to external influences. While the history of currency internationalization provides general guidance that China should not ignore, none of today's international currencies started the internationalization process from the same point as China. The Chinese government should first clarify its goal, and then proceed gradually with internationalization of the RMB while reforming and opening its financial market.