The RMB Internationalization Strategy and the Role of the e-CNY: An Analysis of the Potential and Challenges of the RMB/e-CNY as Reserve Currency in Reducing USD Dependence

The RMB Internationalization Strategy and the Role of the e-CNY

Krauss, Sonja

4. term

Development and International Relations, Master

2023

2023-05-12

69

This research investigates the reasons and motivations behind the active efforts of China to develop the status of the RMB, specifically through RMB internationalization and the development of the e-CNY. The research is structured around seven sub-questions that analyze the drivers, current state, US response, potential benefits and risks, and potential impact of the RMB internationalization strategy and the usage of digital currencies on the global financial system and the dominance of the USD as the global reserve currency. The hypothesis suggests that the RMB internationalization strategy of China revolves around the goal to reduce dependency on the USD while enhancing the economic and geopolitical influence of China. Additionally, that the digital nature of the e-CNY presents advantages that can be leveraged over traditional currencies such as the USD to achieve its goal. The research is based on a theoretical framework comprised out of International Political Economy (IPE), Structural Realism, and Rise and Fall theory; a qualitative (deductive content analysis) and quantitative (descriptive quantitative analysis) mixed methods approach. The findings of the research suggest that there has been an upwards trend in the efforts of China to internationalize the RMB despite recent financial and geopolitical influences. In addition to that, that the e-CNY could be a viable alternative to traditional currencies. Therefore, it enhances the RMB internationalization strategy and poses a potential challenge to the dominance of the USD over the current international monetary system (IMS).

China ; USD ; RMB ; e-CNY ; Internationalization ; Digital Currency ; Reserve Currency ; Geopolitical ; Competition

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