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The Renminbi as a Trading Currency: Evidence from Selected Countries Participating in the Belt and Road Initiative

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  • Haihong Gao
  • Yingting Li

Abstract

This paper investigates the effects of the renminbi (RMB) exchange rate on trade prices and volumes in selected Belt and Road Initiative (BRI) countries in comparison with the effects of the US dollar. The stylized facts show that the RMB is underused in bilateral trade with selected BRI countries where intermediate goods dominate. By estimating the level of exchange rate pass‐through and trade volume elasticity, we find that the RMB is significantly correlated with the volume of imports in the sample countries, predicted by the producer currency pricing (PCP) paradigm. We also regroup intermediate and final goods between China and the BRI countries. The evidence shows that dollar fluctuation affects export volumes, reflecting the role of the US as a final goods destination, whereas the RMB exerts a significant impact on the volume of intermediate goods imported from China to the sample countries due to China's important position in global value chains.

Suggested Citation

  • Haihong Gao & Yingting Li, 2020. "The Renminbi as a Trading Currency: Evidence from Selected Countries Participating in the Belt and Road Initiative," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(5), pages 45-63, September.
    • Handle: RePEc:bla:chinae:v:28:y:2020:i:5:p:45-63
    DOI: 10.1111/cwe.12352
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    Cited by:

    1. Yan Wu & Chunlai Chen & Cong Hu, 2021. "Does the Belt and Road Initiative Increase the Carbon Emission Intensity of Participating Countries?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(3), pages 1-25, May.
    2. Wang, Hui & Si, Ieongcheng & Chen, Zhihua, 2024. "Does the Belt and Road Initiative promote China and the countries along the route to reconstruct the global value chain? Evidence from value-added trade," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 63-83.

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