Renminbi internationalization and research agenda for currency network expansion

This article calls for a new research agenda that helps capture the dynamic processes of RMB internationalization in particular and currency internationalization in general. The aperture we have found in the existing, transaction-based literature is that there is relatively little to say about the process of currency network expansion. Indeed, no serious work on currency internationalization ignores the role of currency networks in the politics of the currency pyramid. However, the problem is that these works treat the currency networks exogenously. By exogenous treatment, we mean that they explain the expansion and constriction of currency networks as by-products of trade and investment. In our view, this exogenous treatment of currency networks results in an analytical blind spot regarding how currency network expansion occurs, which is pivotal to the success or failure of currency internationalization. Instead, this article suggests that adequate assessment of RMB internationalization requires shifting the analytical focus to the endogenous process of currency network expansion across borders that involves the emerging and ongoing process of RMB’s financial rise in the global economy. China’s recent move toward financial opening may work to speed up RMB-based global financial networks.