RMB internationalization enters the next stage beyond trade settlement

Overview

This report reassesses the progress of RMB internationalization. Its core view is that RMB usage has improved materially, but it remains insufficient relative to China’s share of global GDP and trade, and the progress is uneven. The most visible gains are still concentrated in China-related trade settlement, while cross-border RMB usage is increasingly driven by investment flows. The report argues that if the RMB is to evolve from a trade-settlement tool into a broader international currency, offshore markets must develop a complete ecosystem that supports financing, hedging, and holding, and Hong Kong will play a central role in that process.

Core views

First, RMB internationalization still has significant upside, as its shares in global invoicing, payments, reserves, and international bond markets remain below the scale of China’s economy. Second, the structure of cross-border RMB transactions has already shifted from current-account dominance to capital and financial account dominance, with bond investment becoming the largest use. Third, the next stage will not mainly depend on full capital account liberalization; instead, it will more likely advance through gradual onshore opening and a deeper offshore RMB market. Fourth, the three essential foundations are more stable and lower-cost offshore RMB liquidity, more complete foreign exchange and interest rate risk management tools, and a broader, more liquid RMB asset pool.

Analysis framework

The report uses the three-function framework of international currency status, measuring RMB internationalization from the perspectives of unit of account, medium of exchange, and store of value, and combines cross-border RMB transaction composition, CIPS transaction volume, offshore RMB deposits, the CNH-CNY funding cost gap, derivatives turnover share, and the bond and dim sum bond markets to assess the progress and bottlenecks of RMB internationalization.

Methodology notes

• International currency functionsUnit of account, medium of exchange, store of value

  Measure the degree of currency internationalization using trade invoicing, payment settlement, reserve assets, and international bond denomination shares.

  The report notes that the RMB has improved across all of these functions, but its global shares in import invoicing, international payments, official reserves, and international bond denomination remain low.

• Transaction structure analysisSplit between current account and capital and financial account cross-border RMB transactions

  Assess the drivers of RMB internationalization by examining the use structure of cross-border RMB transactions.

  Capital and financial account transactions now account for about 75% of cross-border RMB transactions, and bond investment accounted for about 46% in 2024, showing that RMB usage is increasingly investment-driven.

• Market infrastructure assessmentOffshore liquidity, risk management tools, RMB asset pool

  Evaluate whether foreign investors can more easily finance, hedge, and hold RMB assets.

  The report argues that the stability of offshore funding costs, the depth of foreign exchange and interest rate derivatives, access to CGB futures, the dim sum bond market, and the expansion of Connect mechanisms are key to the next stage of RMB internationalization.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• RMB / CNH / CNY

  Core subject of the research

  Strengths

  Policy support is strengthening, cross-border transaction scale is expanding, and the recent appreciation of the RMB helps stabilize offshore funding costs.

  Weaknesses

  Global invoicing, payment, reserve, and international bond shares remain low, and there is still a basis and liquidity split between CNH and CNY.

  Comparison

  The RMB’s global usage share is clearly below China’s roughly 19% share of global GDP and about 12% share of global trade.

  Risks

  RMB depreciation pressure, widening onshore-offshore funding gaps, and a slower pace of capital account opening.

• Hong Kong offshore RMB market

  The central platform for the next stage of RMB internationalization

  Strengths

  It has offshore RMB clearing, deposits, bonds, derivatives, and official liquidity support mechanisms.

  Weaknesses

  Liquidity sources rely more heavily on financial flows and policy facilities, and market depth still needs to improve.

  Comparison

  Compared with full onshore capital account opening, Hong Kong is better suited as a gradual opening and policy testing ground.

  Risks

  Volatility in offshore funding costs, tightening CNH liquidity, and external shocks from US interest rates and exchange rates.

• Chinese government bonds and interest rate derivatives

  Key tools for RMB asset holding and duration risk management

  Strengths

  China’s bond market is large, and tools such as CGB futures and Swap Connect are gradually expanding.

  Weaknesses

  Foreign investors still lack sufficient long-duration interest rate hedging tools, and IRS liquidity is concentrated in the short end and the 5-year tenor.

  Comparison

  CGB futures may hedge long-end government bonds better than IRS or NDiRS, but foreign investor access is still being improved.

  Risks

  Unfavorable yield differentials, insufficient hedging liquidity, and operational and access restrictions.

• Dim sum bonds

  An important component of the offshore RMB asset pool

  Strengths

  Issuance in the first few months of 2026 has been stronger than in the same period of 2025, with more participation from technology companies and foreign financial institutions.

  Weaknesses

  Overall outstanding volume is still small, the yield curve is not fully developed, and secondary-market liquidity and long-duration issuance are insufficient.

  Comparison

  Its share remains low relative to the global international bond market.

  Risks

  An insufficient issuer base, unstable market liquidity, and a pullback in offshore RMB demand.

Key data

• RMB settlement share in China goods trade13% in 2019, 30% in 2025This reflects China-related trade settlement as the clearest current progress in RMB internationalization.
• Total cross-border RMB transactionsAbout RMB 9 trillion in 2017, about RMB 64 trillion in 2024Growth is mainly driven by capital and financial account transactions.
• Share of capital and financial account transactionsAbout 75%This shows that cross-border RMB usage has become clearly more investment-oriented.
• 2024 cross-border RMB usageBond investment 46%, goods trade 19%, direct investment 13%Bond investment is the largest single use.
• Global RMB payment shareAbout 3%-4% over the past two yearsStill below China’s share of global trade and GDP.
• Official RMB reserve shareAbout 2% in 2025The store-of-value function is still at an early stage.
• International bond denomination share of RMBAbout 0.9% in 2025RMB usage in international debt securities remains very low.
• Global turnover share of RMB OTC FX derivatives1.0% in 2010, 8.1% in 2025Foreign exchange hedging tools are relatively more mature.
• Global turnover share of RMB OTC interest rate derivativesAbout 0.8% in 2025Interest rate risk management tools are still materially insufficient.
• Outstanding dim sum bondsAbout RMB 1.4 trillion as of April 2026The offshore RMB bond market still needs more tenor, more issuers, and deeper secondary liquidity.

Impact & implications

If RMB internationalization continues to advance, the beneficiaries may include Hong Kong offshore RMB funding pools, dim sum bond issuance and trading, cross-border bond investment, CIPS usage, RMB derivatives, the expansion of Connect mechanisms, and RMB-denominated commodities and financial products. At the macro level, this would increase the flexibility of RMB use in trade, investment, and reserves, but progress will depend on the pace of policy opening, RMB exchange rate expectations, funding-cost stability, and foreign investors’ risk management capabilities.

Risks

• A renewed weakening of the RMB exchange rate could raise CNH funding costs and weaken offshore liquidity.
• An unfavorable US-China rate spread or a higher-rate environment in major developed markets could dampen foreign investor purchases of RMB bonds.
• Insufficient interest rate and credit hedging tools could limit foreign investors’ expansion from CGBs and policy bank bonds into broader credit assets.
• If Connect mechanisms and capital account opening proceed more slowly than expected, the expansion of investable RMB assets may be constrained.
• Greater reliance of the offshore RMB market on policy facilities and financial flows may increase cyclical volatility.

What to watch

• Whether USD/CNY approaches the report’s expected 12-month path of 6.50.
• Whether the spread between 3-month CNH HIBOR and SHIBOR can remain at a low and stable level.
• Whether average daily RMB transaction volume through CIPS continues to hit new highs.
• Dim sum bond issuance volume, tenor structure, issuer diversification, and secondary-market liquidity.
• Whether Swap Connect expands southbound trading, and whether REITs, private funds, and commodity futures are included in more Connect mechanisms.
• Progress in foreign participation in CGB futures, offshore CGB futures, and RMB interest rate derivatives.
• Changes in the RMB’s share of global payments, official reserves, international bonds, and third-party trade settlement.