RMB internationalization is entering an investment-driven phase; Hong Kong's offshore market is the key to the next breakthrough

Overview

This report re-examines the progress of RMB internationalization. The core conclusion is that international RMB usage has improved, but there is still significant room to rise relative to China's share of global GDP and trade. The clearest progress so far is concentrated in China-related trade settlement, while the structure of cross-border RMB transactions is shifting toward capital and financial accounts, especially bond investment. The report argues that for RMB use to move beyond China-related trade settlement, it needs an offshore RMB ecosystem that is financeable, investable, hedgeable, and reusable, with Hong Kong playing a key hub role.

Core views

Starting from the three functions of an international currency, the report finds that the RMB has made progress in all three—unit of account, medium of exchange, and store of value—but in an uneven way. Over the past two years, the RMB's share of global payments has been about 3%-4%, its share of official reserves about 2%, and its share of international debt security denomination about 0.9%, all well below China's 2024 share of about 19% of global GDP and its 2025 share of about 12% of global trade. The key to future growth is not just settlement channels, but more stable and low-cost offshore RMB liquidity, a more complete set of FX, rates, and credit risk management tools, and a broader and more attractive supply of RMB assets.

Analysis framework

The report first uses the three-function framework for international currencies to gauge RMB global usage, then analyzes the account structure and use-case shifts in China's cross-border RMB transactions, and then focuses on three market foundations: offshore RMB liquidity, risk management tools, and the RMB asset pool. The report also draws on evidence such as CIPS transaction volumes, dim sum bond issuance, CNH HIBOR-SHIBOR spreads, PBOC swap quotas, OTC derivatives shares, Connect mechanisms, and the offshore RMB bond market.

Methodology notes

• Macroeconomic currency internationalizationThree-function framework for international currencies

  unit of account, medium of exchange, store of value

  The report measures RMB internationalization using indicators such as trade invoicing, payment settlement, official reserves, and international debt securities denomination.

• Cross-border capital flow analysisCurrent account and capital/financial account breakdown

  cross-border RMB transaction structure

  The report compares uses such as goods trade, direct investment, bond investment, QFI, and Stock Connect to judge whether cross-border RMB use is shifting from trade settlement to investment-driven flows.

• Offshore market ecosystemFinancing, investment, hedging, and redeployment framework

  offshore RMB ecosystem

  The report argues that the offshore RMB market cannot rely only on deposits or trade settlement; it must form a complete cycle of funding sources, investment targets, risk hedging, and capital redeployment.

Asset mapping & comparison

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

• RMB and CNH/CNY

  Core research subject

  Strengths

  Policy support is strengthening, CIPS transaction volume is rising, and RMB appreciation expectations help reduce offshore funding frictions.

  Weaknesses

  Global payment, reserve, and international debt security shares remain low, while the CNH/CNY basis and capital account constraints still affect convenience of use.

  Comparison

  International RMB use is significantly below China's shares of global GDP and trade.

  Risks

  If RMB depreciation pressure rises or the onshore-offshore spread widens again, offshore liquidity stability could be affected.

• Hong Kong offshore RMB market

  The main hub for the next phase of RMB internationalization

  Strengths

  It has support from clearing, deposits, dim sum bonds, derivatives, Connect mechanisms, and the PBOC-HKMA swap line.

  Weaknesses

  The offshore RMB bond yield curve is still not deep enough, and long-term funding and asset supply still need to expand.

  Comparison

  Compared with other offshore centers, Hong Kong remains the largest offshore RMB trading and funding hub.

  Risks

  If inflows are insufficient or policy support weakens, Hong Kong's RMB liquidity pool could become volatile.

• Chinese government bonds and CGB futures

  An RMB asset pool and long-duration interest-rate hedging tool

  Strengths

  The onshore bond market is large, and CGB futures may hedge long-end sovereign risk better than IRS.

  Weaknesses

  Access for overseas investors to CGB futures was previously constrained, and long-duration interest-rate hedging tools are still being refined.

  Comparison

  IRS liquidity is concentrated in the short end and the 5-year tenor, while CGB futures are better suited to long-end sovereign bond risk management.

  Risks

  The pace of opening, liquidity depth, and cross-border operating costs will affect usage by overseas investors.

• Dim sum bonds

  An important vehicle for offshore RMB asset supply

  Strengths

  Issuance got off to a strong start in 2026, with more active issuance from technology companies and foreign financial institutions.

  Weaknesses

  Outstanding volume is only about RMB 1.4 trillion, and secondary-market liquidity, issuer diversity, and long-tenor supply remain insufficient.

  Comparison

  Compared with the global international debt securities market, RMB-denominated bonds still account for a very small share.

  Risks

  If the issuer and investor base remain limited, the offshore RMB yield curve will be hard to deepen.

• RMB FX derivatives

  FX risk management tools

  Strengths

  The RMB share of global OTC FX derivatives turnover has risen to 8.1%, FX swaps are the main tool, and Hong Kong accounts for more than 40% of offshore RMB trading.

  Weaknesses

  Trading is highly concentrated in USD and a few centers, and the CNH/CNY basis can still affect hedging costs.

  Comparison

  FX hedging tools have developed significantly faster than RMB interest-rate derivatives.

  Risks

  Basis volatility, liquidity concentration, and operational requirements may reduce hedging efficiency for some investors.

• RMB interest-rate and credit risk tools

  A bottleneck limiting foreign investors from expanding RMB allocations

  Strengths

  Policy progress such as Swap Connect, overseas investor access to CGB futures, and Hong Kong's preparation for offshore CGB futures is helping fill gaps.

  Weaknesses

  The global share of OTC interest-rate derivatives is only about 0.8%, and credit risk mitigation tools are insufficient.

  Comparison

  Interest-rate and credit hedging lag noticeably behind FX hedging.

  Risks

  If credit rating systems and credit risk mitigation tools remain insufficient, overseas investors may continue to prefer CGBs and policy bank financial bonds, making it hard to expand into credit bonds.

Key data

• RMB settlement share in China's goods trade13% in 2019; 30% in 2025This shows that China-related trade settlement is the most visible area of progress in RMB internationalization.
• RMB-denominated share of goods imports in sample countriesabout 1.5% in 2023RMB use in global trade invoicing remains low.
• RMB share of global paymentsabout 3%-4% over the past two yearsStill significantly below China's share of global trade and GDP.
• RMB share of global official reservesabout 2% in 2025The store-of-value function remains limited.
• Share of international debt securities denominated in RMBabout 0.9% in 2025Usage in the international bond market is still at an early stage.
• Total cross-border RMB transaction volumeabout RMB 9 trillion in 2017; about RMB 64 trillion in 2024Capital and financial account transactions contributed the bulk of the growth.
• Share of cross-border RMB transactions from capital and financial accountsabout 75%Cross-border RMB use is increasingly investment-driven.
• 2024 share of cross-border RMB transactions from bond investment46%Bond investment has become the largest single use case, above goods trade at 19%.
• RMB share of global OTC FX derivatives turnover1.0% in 2010; 8.1% in 2025FX hedging tools have developed relatively quickly.
• RMB share of global OTC interest rate derivatives turnoverabout 0.8% in 2025Interest-rate hedging tools are clearly lagging; long-duration hedging remains a weakness.
• 3-month CNH HIBOR-SHIBOR spreadabout 15-25 bp since April 2026This has narrowed significantly from the prior 100-200 bp and even higher volatility, indicating lower offshore RMB funding friction.
• 12-month USD/CNY forecast6.50Goldman Sachs believes RMB appreciation would help keep the onshore-offshore funding spread narrow and stable.
• Offshore RMB clearing bank networkAs of June 2025, 35 clearing banks covered 33 economiesThese economies account for about 64% of China's 2025 goods trade.
• Dim sum bond outstandingabout RMB 1.4 trillion as of April 2026The offshore RMB bond market remains limited in scale and needs more issuers, better secondary liquidity, and longer maturities.

Impact & implications

For investors, the next stage of RMB internationalization looks more like building an offshore RMB financial ecosystem than simply expanding trade settlement. If Hong Kong's RMB liquidity pool becomes more stable, hedging tools become more complete, and dim sum bonds and offshore RMB assets become more abundant, foreign investors' willingness to hold and use RMB assets may increase. For China's macro and financial markets, gradual onshore opening, expansion of Connect mechanisms, offshore CGB futures, and more RMB-denominated commodities and bond products may become key levers for promoting the international use of the RMB.

Risks

• RMB depreciation pressure could widen the CNH/CNY basis and raise offshore RMB funding costs.
• Insufficient long-duration interest-rate hedging tools could limit overseas investors' holdings of long-dated RMB bonds.
• An incomplete credit risk mitigation toolkit and credit rating system may limit overseas investors from expanding from interest-rate bonds to credit bonds.
• The scale, maturity structure, and secondary-market liquidity of the dim sum bond market may remain insufficient, slowing the build-out of the offshore RMB asset pool.
• If Connect expansion and onshore opening proceed slower than expected, international RMB use may continue to be concentrated in China-related trade settlement.
• If the global rate environment and China-US yield spread are unfavorable for RMB assets, foreign investors' allocation appetite may weaken.

What to watch

• Whether average daily RMB turnover in CIPS continues to hit new highs.
• Changes in the RMB share of global payments, trade invoicing, official reserves, and international debt securities.
• Whether the RMB share of China's goods trade settlement continues to rise from around 30%.
• Changes in the share of bond investment, QFI, Stock Connect, and direct investment in cross-border RMB transactions.
• Whether the 3-month CNH HIBOR-SHIBOR spread stays at low levels.
• Hong Kong RMB deposits, dim sum bond issuance, and the depth of the offshore RMB bond yield curve.
• Whether Swap Connect expands to southbound trading, and whether Connect mechanisms cover REITs, private funds, and commodity futures.
• Progress in overseas investor participation in onshore CGB futures and Hong Kong offshore CGB futures market development.
• PBOC swap quotas, actual drawdown ratios, and expansion of the offshore RMB clearing bank network.
• Whether USD/CNY approaches Goldman Sachs' 12-month forecast of 6.50 and continues to support stable offshore RMB funding.