Renminbi Internationalization and China’s Financial Development Model

Internationalization was a spontaneous outcome of the marketplace for the rest of the world’s major currencies, but China is breaking with history by making it official policy to steer the renminbi on a path toward reserve currency status. However, this managed internationalization occurs at a time when China’s financial development is still in a transitional phase featuring capital controls and other constraints on credit growth and allocation.  In this Center for Geoeconomic Studies Working Paper, produced in association with CFR’s International Institutions and Global Governance program, Robert McCauley explores the policy challenges facing Chinese authorities as their pursuit of an internationalized renminbi threatens to undermine the effectiveness of their domestic financial market controls.t