Internationalization of the RMB: An Evaluation Framework

As the Chinese economy continues to develop, China is becoming a more active player in the world economy, and the RMB is being more widely used in international markets. In this paper we use indicators representing the RMB's functions of pricing, settlement and reserve to create an RMB Internationalization Index (RII) to evaluate the degree of the internationalization of the currency. We calculate the RII levels in 2010 and 2011, and find that the RII increased dramatically during these two years. However, when compared to the currencies of developed countries, the RMB is far from achieving complete internationalization. We propose a "three-step development" strategy for the RMB to be internationalized.