The RMB Internationalization and Its Impacts on Chinese Companies

Abstract

The RMB internationalization program embodies a crucial message that China is conveying to the world: its economic growth is accelerating at an outstanding pace.

China magnifies its economic and global role and nowadays it is the second largest world economy, the top manufacturing and trading nation and one of the most influential investors in countries throughout the world. These progresses are also supported by the internationalization of the Chinese currency since it as well represents China’s willing of self-determination in the global economy.

Currently, the renminbi is the 5th most traded currency in the world, however, due to the fact that China owns an irrelevant currency with a massive economy, progresses still need to be achieved. The renminbi also bears crucial controversial international monetary economic issue, such as the renminbi undervaluation. The renminbi misalignments induces significant economic global consequences, one of the most discussed question labels China as the "factory of the world".

Since 2009, the Chinese government supported the internationalization of the RMB increasing its influence inside and outside China. The RMB internationalization strategy can be summarized into three main clusters with three different objectives. With the establishment of RQFII scheme, QFII scheme, the Free Trade Zones and the dim sum bonds market, the Chinese government aims at promoting the use of RMB in international business operations and increasing offshore RMB liquidity. Moreover, through Bilateral Swap Agreements, the founding of RMB clearing centers, the introduction of CIPS and the development of FTAs ​​network, China encourages the RMB's network externalities; in conclusion, with the launching of international initiatives like BRI and AIIB, China aspires to expand yuan’s international role. While China attempts to open its economy, the Chinese government still exerts strict control over the full convertibility of the RMB and lacks in efficiency and transparency of financial institutions.

The significance of the RMB internationalization project is massive and it affects not only China as a country but also the global economy. Although the evolution is proceeding at fast rate, the RMB internationalization is still at an initial stage, it is indeed confining predetermine the future conditions. Through a comparison with the establishment of euro as main currency of the EU area, the thesis attempts to offer a comprehensive analysis of the possible future impacts of the RMB internationalization over the Chinese companies. The Chinese companies would experience an escalation of the competition between the several companies which operate in the same area. Focusing on improvements of prices and quality conditions, the companies would offer to the consumers enhanced services and circumstances, thus sparking the beginning of virtuous cycle.