Currency Internationalization, payment infrastructures and central banks: An institutional analysis of renminbi internationalization

Abstract

This study explores the role of central banks in designing cross-border payment infrastructure as part of a broader agenda of currency internationalization, focusing on the Chinese experience from 2008 to 2023. Based on primary data- including descriptive statistics and interviews with senior officials from the People's Bank of China and staff from Chinese commercial banks – and triangulating information from secondary literature and official documents, the article traces the evolution of the renminbi's cross-border payment network comparing these developments with the early internationalization stages of the U.S. dollar. China's strategy is characterized as 'imitate and innovate,' where the renminbi's payment network development mirrors, to some extent, the institutional frameworks underpinning the dollar's global use. However, it also exhibits notable differences in public sector involvement and pace of development. This comparison indicates that, for late- industrializers, central bank plays a more pronounced role in jumpstarting a currency internationalization process. Moreover, this article also contributes to the international currency literature by demonstrating how payment infrastructures can aid in enhancing a country's external resilience through currency internationalization, without necessitating the complete liberalization of the capital account.