China's Renminbi Faces Hurdles in Becoming a Global Currency Powerhouse
The article discusses the impact of including the Chinese currency, renminbi, in the SDR basket. It analyzes data from 2016 to 2020 and finds that while China's statistics show increased renminbi usage, trading partners and SWIFT data show only moderate growth. This is because Chinese banks lend renminbi abroad, but borrowers repay in dollars. The main obstacle to renminbi's international use is China's restrictions on financial transactions. The author suggests that China fears liberalizing its financial accounts due to the risk of renminbi depreciation. Contrary to popular belief, the renminbi has been stronger than G7 currencies in the past 25 years. Therefore, it is unlikely that the renminbi will significantly increase its international role in the near future.