In order to accelerate the internationalization of the Renminbi (RMB), it is necessary not only to bind it with high-quality goods and provide more convenience measures at the foundation level but also to adapt the institutional adjustments at the currency level accordingly. As China has become the largest trading partner for many oil-producing countries, the use of RMB has begun in China's oil trade settlement, but it is still limited in scope and quantity. The US dollar has achieved the status of a world currency by pegging to gold and oil, forming a dollar monetary network embedded in the financial and trade systems of countries around the world, affecting financial transactions and trade of various countries, and the US uses this as a weapon to control countries. In recent years, Iran and Russia have been successively excluded from the SWIFT system by the US, which is a typical example of the US using this weapon. At present, the US and the West are accelerating their strategy of decoupling and breaking the chain in the industrial field against China, and it is possible to take similar measures against China in the financial and monetary fields in the future as against Iran and Russia. To counter the US's use of the dollar weapon to contain China, China should actively promote the pace of RMB internationalization, use China's most competitive manufacturing products as the foundation, and create a "commodity RMB" accepted by the world, analogous to "gold dollar" and "oil dollar", to enhance the international influence of the RMB and offset the financial sanctions such as "de-SWIFT" that the US may launch against China.

The internal considerations of the US and the West for "decoupling and breaking the chain" with China

After the Obama administration took office in the US in 2009, it emphasized the strategy of "returning to Asia" and positioned the relationship with China as "competition and cooperation". However, after the Trump administration took office in 2017, it abandoned the previous competitive and cooperative thinking and turned to a comprehensive competitive relationship with China. In this situation, the relationship between the US and the West and China has become increasingly tense. One of the main reasons for the change in the attitude of the US and the West towards China is that they believe that since the reform and opening up, China will gradually absorb the Western political system while absorbing the Western economic system, so the US and the West encourage and support China to join the WTO and continue to integrate into the world. However, after 40 years of reform and opening up, China has grown into the world's second-largest economy by fully learning and absorbing advanced Western technology and management experience, but it has not moved towards the West politically, but has adhered to its own development path. The US believes that China's development model seriously threatens the status and economic interests of the US. This result has accelerated the US to adjust its long-term strategy of contact or integration with China. Therefore, since the Trump administration took office, it has adopted "decoupling and breaking the chain" against China, in order to isolate China and block China's global development, to ensure that the US's global hegemony is not challenged and to give priority to protecting the US's own interests. In this situation, the further development and integration of China's economy into the world will inevitably be subject to more and more obstacles and negative impacts.

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The "decoupling and breaking the chain" at the financial and monetary level may not be ruled out

At present, in addition to gradually increasing the containment strategy against China from the military, technology, and trade fields, the US and the West may also be gradually preparing for "decoupling and breaking the chain" with China at the financial and monetary level, that is, excluding China's financial system, financial assets, and monetary system from the current global system. Although such measures have not yet appeared substantially, judging from the news released by US Secretary of State Blinken during his visit to China this year about excluding some Chinese banks from SWIFT, it is not groundless, or it has already begun some kind of testing. In fact, it is not uncommon for the US to use SWIFT as a financial weapon to strike opponents. In 2012, the US excluded Iranian banks from SWIFT; in 2022, since the Russia-Ukraine conflict, the US has excluded some Russian banks from the SWIFT system. Whether it is against Iran, a major global oil exporter and a major Middle Eastern geopolitical country, or against Russia, a major global nuclear country and a major global energy country, the US can decisively use the SWIFT weapon to strike opponents for its own interests, regardless of the possible negative impact on global economic trade or the opponent's counterattack. As a country with a higher dependence on SWIFT, China also has the possibility of being excluded from SWIFT by the US in the case of extreme deterioration of relations with the US. As the world's largest trading country and a major foreign investment country, China has many assets and financial interests globally. In 2023, China's total import and export volume was 41.8 trillion yuan, accounting for 33% of GDP, of which only about 30% was settled in RMB. Currently, China's total overseas assets exceed 9.3 trillion US dollars, and the US Treasury bonds held are 780 billion US dollars. In extreme cases, if Chinese banks are obstructed by the US in the global currency trading system, it will at least cause a significant negative impact on China's international trade and financial assets in the short term.

The pace of RMB internationalization may need to be further accelerated

For a long time, the path of RMB internationalization has been market-driven and relatively cautious in terms of rhetoric. From the "RMB goes out in line with market demand" at the beginning of the 21st century to the gradual proposal of "RMB internationalization", it shows that the RMB's actions in this regard are not aggressive. However, since 2018, the continuous deterioration of relations between China and the US and the West may force the pace of RMB internationalization to be accelerated, and it can even be said that to some extent, the RMB needs to be "passively internationalized" to meet the accelerated arrival of severe overseas situations. So how to accelerate the internationalization of the RMB? China has done a lot of work in encouraging RMB settlement and building the CIPS system, and has signed local currency swap agreements with some central banks, which are helpful for the use of the RMB in related countries and need to be further accelerated and expanded. However, if the internationalization process of the RMB is only promoted from the above perspective, it may not be able to fully cope with the overseas pressure faced by the RMB under the current severe situation, so new ideas and more fundamental breakthroughs are needed to solve these problems. From the perspective of the US dollar, it has firmly established the role of a global currency, but the global status of the US dollar is not achieved by simply establishing a payment settlement system. Essentially, the core reason why the US dollar can become a global currency is that the value represented by the US dollar behind it is global and authoritative, which is the most critical and core point, and it is also the most worth thinking about for the next step of RMB internationalization.

The enlightenment from "gold dollar" to "oil dollar"

From the positioning of the US dollar as a global currency, an important milestone is the Bretton Woods system established in 1944. According to the Bretton Woods system, the US dollar was pegged to gold (35 US dollars for one ounce of gold), and other countries' currencies were pegged to the US dollar, forming a "double peg system". Based on such arrangements, the US dollar firmly established its status as an equivalent to gold, and the term "gold dollar" emerged, with the US dollar being equivalent to gold globally. Gold is the main embodiment of authoritative high-value goods globally in history, so the US dollar also took advantage of gold to become a symbol of global authoritative high-value goods. At the same time, because the US dollar can be conveniently settled and traded through the global electronic trading system and is easy to transport and store, its advantages in this regard exceed gold, so the US dollar quickly became a global currency. The US firmly grasps the global payment settlement system through the US dollar, forming a "dollar global nerve network" embedded in the economic and financial systems of various countries, thus forming the main handle of American hegemony. In fact, the US dollar as the core currency of the Bretton Woods system faces inherent contradictions. The US continuously expanded its fiscal deficit to launch the Vietnam War and increase domestic social welfare, leading to the over-issuance of the US dollar, which in turn caused the US dollar to have an increasing devaluation pressure relative to gold. The US cannot continue to kidnap the global financial system for its own national interests. In 1971, due to the huge demand from various countries to exchange US dollars for gold, the US announced the cancellation of the direct exchange of the US dollar for gold, and the Bretton Woods system collapsed, marking that the contradiction between the over-issuance of the US dollar and the fixed amount of gold is unsolvable. After the collapse of the Bretton Woods system, the rise of currencies such as the German mark, the pound, the yen, and the franc posed a threat to the global currency status of the US dollar. In the 1970s, due to the continuous increase in global oil demand, oil became the industrial blood of the world. In 1974, the US signed an agreement with Saudi Arabia, stipulating that Saudi Arabia would sell its oil priced in US dollars. Subsequently, other OPEC member countries followed suit. The US dollar was pegged to oil, forming the "oil dollar", and the US dollar became the currency medium symbol representing the world's energy and industrial production, continuing to play the role of the main global currency. Looking at the development process of nearly 80 years, the US dollar has successively constructed the "currency nerve network" of global value exchange, transaction settlement, and industrial economy through pegging to gold and oil, thus becoming a global currency. In this process, the US has used the influence of the global currency to achieve its own national interests, such as excluding Iranian and Russian currencies from the SWIFT system, which is the most obvious example and has also achieved tactical goals. However, from a strategic perspective, the US's frequent use of the US dollar as a weapon has actually weakened the credibility of the US dollar as a global currency, forcing more countries to turn to establishing a currency settlement system not controlled by the US. Recently, there have been rumors that Saudi Arabia will no longer renew the US dollar settlement agreement for oil with the US, indicating that the credibility of the US dollar has been increasingly impacted.The Urgent Need for Further Internationalization of the Renminbi

From the perspective of purchasing power parity, China has already surpassed the United States to become the world's largest economy. Even based on the current dollar value, China's GDP has reached about 65% of that of the United States, making it the second-largest economy globally. In terms of trade, China has surpassed the United States to become the world's largest trading partner. A significant amount of global goods are manufactured in China, and the world needs to trade with China to exchange for manufactured goods.

However, from the perspective of comprehensive national strength and economic and trade influence, the Renminbi still has a lot of room to rise to a currency status that is commensurate with China's national strength. Yet, the space for the Renminbi to expand within the SWIFT system controlled by the United States is bound to be very limited and uncertain. More importantly, the Renminbi also needs to guard against the risk of the United States excluding China from the SWIFT system. Under these circumstances, China should actively consider what methods to use to broaden the path of Renminbi internationalization. Looking at the history of the US dollar becoming a global currency, whether it was the "gold dollar" or the "oil dollar," they were all firmly tied to the world's main value objects or to the core raw materials of industry and energy. So, in this situation, can China also peg to gold or to oil? Regarding the Renminbi pegging to gold, due to the large amount of Renminbi issued, exchanging Renminbi for gold is actually not feasible. As China has become the largest trading partner for many oil-producing countries, the Renminbi has begun to be used in oil trade settlements, but its scope and quantity are still quite limited.

Several Ideas for Building "Commodity Renminbi"

To accelerate the internationalization of the Renminbi and become a global currency, it should be considered more from the perspective of its own advantages. Here we propose the concept and idea of "Commodity Renminbi." The so-called "Commodity Renminbi" is based on China's advantage as a global manufacturing powerhouse, highlighting the Renminbi as the currency medium for measuring high-quality manufactured goods produced in China. That is to say, the world can purchase high-quality manufactured goods produced in China through the Renminbi. This may be the current basic support for the rapid internationalization of the Renminbi. According to the latest report from the Organization for Economic Cooperation and Development (OECD), in 2023, China's total manufacturing output value accounted for 35% of the global share, surpassing the sum of the second to ninth places (second, the United States with 12%, third, Japan with 6%, fourth, Germany with 4%, fifth, India with 3%, sixth, South Korea with 3%, seventh, Italy with 2%, eighth, France with 2%, ninth, China Taiwan with 2%). At the same time, the quality of Chinese goods has significantly improved, and the cost-performance ratio has further improved. Especially in 2023, China surpassed Japan for the first time to become the world's largest automobile exporter, and the export quantity and quality of lithium batteries, photovoltaic panels, and other electromechanical products have also further increased. At present, the process of Renminbi internationalization should be clearly combined with high-cost-performance Chinese manufactured goods, and comprehensive measures should be taken to label the Renminbi more with high-quality manufactured goods. That is to say, as long as you have Renminbi, you can purchase any high-quality manufactured goods from China. To achieve such arrangements, three measures need to be taken. First, further strict domestic product quality control should be implemented, always placing quality first to ensure that the goods produced and exported are the first or unique in terms of quality, quantity, and type globally. Second, a global sales, transportation, and maintenance network for Chinese goods should be systematically constructed in conjunction with Chinese enterprises. Chinese goods can be sold and transported globally and can also be repaired and replaced globally, making the export of Chinese goods more convenient. Third, with the rapid development and popularization of digital technology, digital currency should be further promoted globally, such as facilitating the overseas demand of Chinese tourists and the global reach of Chinese goods with digital Renminbi, Alipay, WeChat, etc., and actively taking measures to facilitate the use of Renminbi mobile payments by overseas enterprises and individuals, accelerating the formation of a global digital network layout of Renminbi. Of course, to accelerate the internationalization of the Renminbi, in addition to binding it with high-quality goods and providing more convenience measures at the foundation, it also needs to adapt to the system adjustments at the currency level.

First, the content of the "People's Bank of China Law" should be adjusted to adapt to the global use of the Renminbi. The "People's Bank of China Law" stipulates that "all public and private debts within the People's Republic of China shall be paid in Renminbi." It can be seen that according to the law, the scope of Renminbi payment is restricted within the territory of the People's Republic of China. In contrast, the US dollar specifies that it is the "legal tender for all public and private debts," and there is no restriction on the payment area of the US dollar. In view of this, considering that the Renminbi has become an international reserve currency and a major global payment currency, the geographical restriction on the Renminbi's payment of debts within the territory of the People's Republic of China should be removed at the legislative level to promote the further global circulation and use of the Renminbi and support the global use of the Renminbi from a legal perspective. Second, for the Renminbi to become a global currency, it should learn from the beneficial practices of the Federal Reserve's management of US dollar monetary policy. For example, the Federal Reserve has long implemented an inflation targeting system, controlling the inflation rate to reach a target of 2% through policy interest rate operations and money market operations, and forming a cyclical easing and tightening policy loop, with the core being to maintain the stability of the US dollar's value. At least externally, it declares that the Federal Reserve is committed to maintaining the stability of the US dollar's value, thereby enhancing global confidence in holding US dollars. Based on this, Chinese monetary authorities should consider implementing an inflation targeting system, taking an inflation rate of about 2% as the monetary policy target, and promptly withdrawing temporary additional liquidity to form a "loose-tight loop," thereby enhancing global confidence in the stability of the Renminbi's value and thus facilitating the acceleration of the Renminbi internationalization process.