A weakening dollar creates an opening for the RMB, but Miao Yanliang argues China’s reforms, not US decline, will determine whether the renminbi secures a durable global role.
Summary:
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Dollar primacy is fraying, loosening barriers in the international monetary system
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History shows currency transitions require timing and institutional reform
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Economic scale alone cannot overcome entrenched network effects
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RMB internationalisation hinges on capital-market depth and credibility
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Floating FX, capital opening, and reform are decisive, not US decline
Miao Yanliang is Chief Strategist and Executive Head of Research at China International Capital Corporation (CICC). He joined the firm in 2023 after a decade at China’s State Administration of Foreign Exchange (SAFE), where he served as Chief Economist and was closely involved in China’s FX policy and capital-account research. Earlier in his career, he spent five years as an economist at the International Monetary Fund. Miao holds a PhD, MA and MPA from Princeton University, giving him a rare blend of policy, academic and market-facing experience on international monetary systems and RMB internationalisation.
Miao Yanliang argues that the international monetary system is entering a rare transitional phase, as strains within the US-centred dollar order loosen long-standing entry barriers for alternative currencies. However, he stresses that durable monetary leadership is never granted by default. While relative US decline may open space, only deep domestic reform can determine whether the renminbi secures a lasting international role.
Drawing on a core–periphery framework, Miao describes monetary systems as shaped by competing forces of agglomeration and dispersion. Core currencies benefit from powerful network effects, institutional depth, and credibility that reinforce their dominance. Yet these same forces can sow instability over time. Rising fiscal burdens, expanding debt issuance, and the overuse of institutional privilege can gradually erode confidence in the incumbent centre, creating windows for systemic reconfiguration.
Historically, monetary transitions occur not simply because an old centre weakens, but because a rising power pairs favourable timing with decisive reform. The dollar’s displacement of sterling followed Britain’s post-war fiscal strain and policy errors, but only succeeded because the United States had already consolidated its financial system, built deep Treasury markets, and established the Federal Reserve as a credible institutional anchor.
By contrast, Japan missed its window in the 1970s and 1980s. Despite formidable economic strength, delayed and hesitant financial reform meant the yen failed to capitalise on a period of dollar vulnerability. Once reforms finally arrived, the moment had passed and the dollar had reasserted its dominance.
For China, Miao argues, the lesson is clear. Manufacturing scale and trade integration provide a necessary foundation for RMB internationalisation, but they are insufficient on their own. A true breakthrough requires financial-market depth, capital-account opening, and, above all, institutional credibility. Without these, network effects will continue to favour the dollar system.
Miao emphasises three priorities. First, China must deepen RMB-denominated financial markets, expanding the supply of bonds, FX instruments, and derivatives so the currency becomes not just usable, but investable. Second, China must move toward a floating exchange rate, allowing risks to be absorbed by markets rather than concentrated on the national balance sheet. Third, institutional credibility — including predictable macro policy, legal safeguards, and robust macroprudential frameworks — must be strengthened to support long-term trust.
Digital finance may offer a complementary pathway. Cross-border payment interoperability, tokenised offshore RMB instruments, and coordination with onshore digital RMB infrastructure could help embed the currency within emerging settlement systems. Still, technology alone cannot substitute for reform.
Ultimately, Miao concludes that the RMB’s goal is not to replace the dollar, but to act as an additional stabilising anchor in a system under strain
