Former IMF Chief Economist: Xi Jinping Plans to Accelerate Internationalization of Renminbi
Udumbara
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At the start of the new year, Chinese state media published an article by Chinese Communist Party (CCP) leader Xi Jinping urging China to establish a “strong currency” and achieve international reserve currency status for the renminbi.
A former International Monetary Fund (IMF) chief economist stated that Xi’s speech foreshadows a CCP push for the internationalization the renminbi.
“I think China needs to do that to counter the geo-economic weight of the United States. The RMB is just as important a tool as the Chinese military in combating U.S. power,” Kenneth Rogoff, Harvard University economics professor and Moritz C. Boas Professor of International Economics, told The Epoch Times. “Xi understands this. The Europeans are starting to understand this.”
Rogoff served as chief economist of the IMF from 2001 to 2003. He is an elected member of the National Academy of Sciences and the American Academy of Arts and Sciences. The chess grandmaster has long been among the 12 most cited economists.
Xi’s Jan. 31 commentary, published in the CCP’s flagship ideological journal Qiushi, was also part of a speech Xi delivered to senior regional officials in 2024.
Xi said that China needs to establish a “strong central bank” capable of effective currency management, globally competitive financial institutions, and an international financial center capable of “attracting global capital and influencing global pricing.”
Rogoff said Xi’s speech “marks an important moment of his acknowledging that China needs to move towards being reserve currency sooner rather than later. And I think he’s sending a signal to bureaucrats, regulators, that he would like to move things along at a faster pace.”
The war in Ukraine and the subsequent Western sanctions against Russia have made the CCP aware of its vulnerability within the dollar-dominated system. China is vigorously promoting the renminbi as an alternative currency for trade with Global South countries and its Belt and Road partners.
Rogoff pointed out that internationalizing the renminbi poses many challenges.
“There are several [obstacles], but I would say the most important is that China needs to open up its government bond market fully to international investors. It doesn’t need to open every market. It doesn’t need to open up its stock market necessarily, although it would help. But it’s essential that investors be able to freely trade in government bonds,” he said.
Opening the Chinese government bond market would increase the supply of renminbi-denominated assets, which is essential for foreign central banks and investors holding reserves. Strengthening capital account liberalization would also be needed to facilitate global access to China’s financial system and enhance the renminbi’s status as a reserve currency.
Free Buying and Selling Needed
Rogoff stated that for the renminbi to become an international reserve currency, it needs to be capable of being freely bought and sold, and free from capital controls on the purchase or sale of any other currency.“These are fairly minimal changes that China would have to make. It would have to allow the renminbi to be a freely floating currency. It can intervene in the sense of buying and selling bonds, but it cannot put taxes, controls, limitations on how much people can buy and sell. So that would be the most essential thing that [China] needs to do. You can’t be a reserve currency if people can’t freely use the currency. And ... what that really means is [to] buy and sell bonds.”
System Benefits Interest Groups
Rogoff believes that the CCP’s strict financial controls benefit vested interest groups, creating significant political resistance to the internationalization of the renminbi which, “more than anything, has made a transition difficult.”Rogoff said: “The current regime advantages firms that are beneficiaries of China’s system of directed credit, especially state-owned enterprises and favored new industries, who can borrow at lower interest rates than would be the case if Chinese savers could invest more abroad. It also favors exporters who benefit from a relatively weak exchange rate, while hurting consumers who have to pay more for imports.”
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System Hinders Internationalization
Rogoff said, “It’s a geo-economic and geopolitical imperative for China to [make the renminbi] a reserve currency if it really aims to compete with the United States.”However, the CCP’s authoritarian system is at odds with the conditions necessary for the incubation of RMB internationalization.
Rogoff pointed out that a crucial step in RMB internationalization is building investor confidence. “Strengthening the rule of law in China would encourage foreign investors to think their money was safe,” he said.
However, in reality, the CCP’s practice of placing power above the law is scaring away foreign investors. According to the U.S. State Department’s “2025 Investment Climate Statements: China” report, foreign investment in China fell by 27.1 percent in 2024, the largest decline since 2008, continuing a downward trend.
U.S. and other foreign companies have stated that they are increasingly anxious about participating in the Chinese economy for various reasons. These include sluggish economic growth, a restrictive business environment, and the CCP’s increasing use of legal and regulatory tools as diplomatic leverage and the targeting of foreign individuals and companies that cross the party’s political red lines.
Xi has strengthened his dual control over the party and himself, employing Stalinist methods, purging all visible opposition within the party, building a growing personality cult, and enshrining “Xi Jinping Thought” in the constitution. The government has explicitly warned the public to resist Western values. Meanwhile, many universities and research centers with global ambitions are increasingly disconnected from their international counterparts.
