How Outward Foreign Direct Investment Shapes the Path of RMB Internationalization: An Empirical Analysis Based on Multiple Regression and VAR Models

In recent years, the growth of international trade has faced significant disruptions due to the COVID-19 pandemic, trade frictions, and geopolitical tensions, revealing the limitations of relying solely on trade to advance the internationalization of the Chinese renminbi (RMB).This study examines the role of China's Outward Foreign Direct Investment (OFDI) as a key driver of RMB internationalization by constructing a multiple regression model and a vector autoregression (VAR) model.Using quarterly data from 2012 to 2022 and the China RMB Internationalization Index (CRI) as the primary dependent variable, the empirical findings confirm a long-term relationship between OFDI and RMB internationalization(Johansen trace statistic = 404.89).The regression model demonstrates a strong explanatory power (R 0.79).A Granger-causality test(an econometric technique that checks whether past values of one variable improve forecasts of another) shows that CRI significantly influences subsequent OFDI flows.In contrast, OFDI does not predict changes in CRI.Furthermore, variance decomposition results show that the contribution of OFDI to the internationalization of the RMB increases steadily over time.RMB CRI variance explained by OFDI rises from 5 % at horizon 1 to 48 % at horizon 10, underscoring a steadily intensifying link.These findings imply that RMBdenominated OFDI can diversify global reserve portfolios, reduce emerging-market exposure to U.S. dollar volatility, and strengthen China's monetary influence in Belt-and-Road partner economies, highlighting its increasing strategic importance.The findings offer theoretical insights and practical implications for understanding the dynamic mechanism between capital outflows and currency internationalization under evolving global economic conditions.