The Rising Tide of the Renminbi: How Export Competitiveness Drives Cross-Border Settlement

The Power of Export Prowess

China's economic ascent has brought with it a growing desire to see its currency, the Renminbi (RMB), take a more prominent role on the world stage. This study delves into the micro-level dynamics of RMB cross-border settlement, revealing how a company's export competitiveness significantly influences its decision to utilize the RMB in international trade.

Think of it like this: the more competitive a Chinese firm is in global markets, the more likely it is to invoice and receive payments in RMB. This shift away from traditional dominant currencies like the US dollar represents a crucial step in the ongoing internationalization of the RMB.

Free Trade Zones: Amplifying the Effect

This research also highlights the important role of China's Free Trade Zones (FTZs). These zones act as catalysts, amplifying the positive impact of export competitiveness on RMB settlement. They provide a supportive environment where businesses can thrive and further embrace the RMB for cross-border transactions.

Size Matters: The Impact on Smaller Firms

Interestingly, the impact of export competitiveness on RMB settlement isn't uniform across all firms. Smaller companies, often facing greater constraints in resources and bargaining power, experience a more pronounced effect. As their competitiveness grows, they are more inclined to leverage the advantages of using the RMB, showcasing the importance of micro-level factors in currency choice.

Industry Concentration and Liability Structure: Further Insights

The study further reveals that the effect is stronger in industries with higher concentration. Leading firms in these sectors often pave the way for broader RMB adoption. Similarly, companies with a higher proportion of operating liabilities, indicating a stronger market position, also exhibit a greater tendency towards RMB settlement as their export competitiveness increases.

Beyond Settlement: Reaping the Rewards

The benefits of increased RMB settlement extend beyond mere transaction convenience. This research demonstrates a link between RMB usage and reduced import dependence, strengthening a firm’s supply chain resilience. Furthermore, it positively influences firm value, creating a positive feedback loop in the capital markets.

As Dr. Xiaoyong Zhou of Guilin University of Aerospace Technology notes in his editorial review of this study (Bu & Jiang, 2025), this research provides "valuable empirical insights for the strategic promotion of RMB internationalization."

Charting the Course for the Future of the RMB

This study's findings offer valuable guidance for both businesses and policymakers. Companies should prioritize enhancing their export competitiveness to unlock the benefits of RMB settlement. Meanwhile, policymakers can further support FTZ development and tailor policies to specific firm characteristics and industry dynamics. By working together, they can accelerate the RMB's journey towards becoming a leading global currency.