Status quo crisis again? RMB challenges and dollar hegemony

Despite the slow process of RMB internationalisation over the last decade, we make an empirical argument that China has recently intensified the RMB’s international and domestic capacity to make it a formidable challenger to the dollar as a global currency in the medium and long-term range. We highlight that China has made substantial progress in expanding the RMB currency network and institutionalising a deep and open domestic financial market, the two most severe obstacles emphasised by the skeptics on RMB internationalisation. In developing this argument, we draw on the ‘credit theory’ of money and explain the global expansion of the RMB currency network in terms of the external and internal production of credit and debt relations denominated in the RMB across borders. Our empirical findings suggest that the pace of the growing foreign demand for RMB-denominated assets has recently taken off.