Economics: Russia’s war and the renminbi

The infrastructure for renminbi internationalisation is mostly place.

US sanction threats have weighed on Chinese assets. They may also push China to redouble its efforts to establish a renminbi alternative to the dollar-based international financial order. It’s made more progress on that front since 2015 than most assume.

But it’s still under scaffolding and hasn’t been tested.

An international clearing platform could make the renminbi more useful as a means of exchange. Commodity futures could boost its role as a unit of account. And capital account opening could improve the renminbi’s role as a store of value.

Internationalisation is likely to be a long-term process.

The logic of mutually assured destruction is probably sufficient to dissuade US sanctions on China in the near run. But renminbi internationalisation could remake the global economy. Exactly how, though, is unclear.