Recent developments and shifting global dynamics are prompting experts to reconsider long-held views on the internationalization of currencies, with particular attention on the Chinese renminbi (RMB). Traditionally, full currency convertibility and fully liberalized capital accounts have been seen as prerequisites for a currency to achieve global prominence. However, economists suggest that the RMB could defy this notion and emerge as a leading international currency driven by trade, investment, and real-economy linkages rather than solely by financial market openness.

Peng Wensheng, chief economist at China International Capital Corp, highlighted that growing geopolitical tensions and the increasing use of financial sanctions by the United States are encouraging countries to adopt measures such as capital account controls. These restrictions, in turn, may weaken reliance on financial assets as universal stores of purchasing power, boosting the importance of real economic factors for currency internationalization. Peng emphasized China’s comparative advantage in this context, citing its status as the world’s largest manufacturing hub and leading trading nation. According to him, these strengths could support expanding use of the RMB in global trade, investment, and intergovernmental cooperation, even without complete financial market liberalization.

In a related assessment, Zhu Min, former deputy managing director of the International Monetary Fund (IMF), challenged the idea that full capital account liberalization is essential for a currency’s global influence. Citing the RMB’s 12.28 percent weighting in the IMF’s Special Drawing Rights basket—second only to the U.S. dollar and euro—Zhu argued that existing limitations do not preclude substantial international use. He pointed to the considerable potential for RMB settlement in Chinese trade, especially with the country’s large import volume of commodities, which could increasingly be priced and transacted in the RMB.

Supporting data from the People’s Bank of China (PBOC) indicate a significant rise in cross-border RMB settlement under China’s current account, which pertains to trade in goods and services. In May, this figure reached 1.67 trillion yuan ($245.8 billion), up from 1.31 trillion yuan a year earlier. Additionally, RMB receipts and payments under the capital account have grown to represent about 60 percent of cross-border flows, according to PBOC figures.

Forecasts from Lu Ting, chief China economist at Nomura, suggest that the RMB may eventually overtake the euro to become the world’s second most important international currency, driven primarily by real-economy linkages such as trade and the global expansion of Chinese companies. He contrasted the RMB’s trajectory with that of the Japanese yen, which expanded internationally largely through financial markets and carry trades following Japan’s capital account liberalization in the 1990s. Lu expressed confidence that steady progress and ongoing financial market opening will support the RMB’s rise over the next one to two decades, provided adequate liquidity is supplied to overseas users.

Currently, overseas institutions and individuals hold more than 10 trillion yuan in onshore RMB financial assets. In June, PBOC Governor Pan Gongsheng reaffirmed commitments to further enhance the RMB’s internationalization by deepening China’s financial market openness and expanding global participation. These initiatives, coupled with resilient real-economy links, suggest a potentially transformative path for the RMB as a global currency amid evolving international financial conditions.