On the Geographical Dispersion of Offshore Renminbi Trading: Evidence from the 2019 and 2022 Triennial Survey

ABSTRACT This paper analyses the Bank for International Settlements (BIS) triennial survey on foreign exchange trading, conducted in April of 2019 and 2022 – before and close to the end of the COVID-19 pandemic. Did the evolution of RMB trading change during these years, and did this episode have an effect on the Renminbi’s path to establish itself as a major currency on world-financial markets? Compared to the previous survey period from 2016 to 2019, analyzed in Cheung, Yin-Wong, Louisa Grimm and Frank Westermann, (The Evolution of Offshore Renminbi Trading: 2016 to 2019, Journal of International Money and Finance, Vol. 113, May 2021.), we find the following new patterns: (i) While policies to promote the use of RMB trading and macro-factors played a role in the internationalisation of the RMB in the 2016 to 2019 period, these elements were not prominent drivers in the 2019 to 2022 period. (ii) Furthermore, there is only limited evidence that pandemic related factors, such as restrictions on international mobility, or business closures, had a lasting effect on the geographic distribution of RMB trading. (iii) Instead, the largest share of variation in the data is explained by market forces, such as the RMB’s long-term convergence to the share of all currencies. The latter result is reminiscent to the findings in Cheung, Yin-Wong, McCauley, Robert and Shu, Chang, 2019. (Geographic spread of currency trading: the renminbi and other EM currencies. China & World Economy 27 (5), 25-36.) for the 2013 to 2016 period. Furthermore, we document some new insights from the decomposition of the data by region and by instrument. We find that the speed of convergence is particularly strong in the options market, and in the financial centres of North America and Europe.