Re – Estimating renminbi usage in cross-border payments and trade finance: Is there evidence of export intensity for trading partners?
Year: 2026
Type: article
Abstract: This paper re-estimates the impact of China's central bank Bilateral Currency Swap Agreements (BSAs) on cross-border trade flows and trade finance, evaluating whether these agreements induce an export intensity effect for trading partners.Utilizing a theory-consistent Structural Gravity Model estimated via Poisson Pseudo Maximum Likelihood (PPML) to control for heteroskedasticity and zero-trade observations, the study analyzes an extensive panel dataset of 27 swap-recipient countries covering bilateral trade flows across 213 countries from 1900 to 2025.The empirical findings reveal that China's bilateral currency swap network generates substantial trade creation.Intra-member trade shares and export intensity display large positive swings-increasing counterparty trade more than threefold-without producing evidence of trade diversion away from non-member nations.These results suggest that while China's expansion of swap lines is driven in part by self-interest and intent to project financial influence, the underlying economic benefits are substantially symbiotic.By facilitating local RMB trade clearance, the arrangement mitigates dollar shortage risks, lowers transaction costs, and supports China's broader capital account liberalization.Ultimately, the strategic internationalization of the RMB serves to reform the US-centric international monetary architecture by offering a viable hedge against systemic global liquidity shocks.
Author: Abdullahi Ahmed Mohammed
Institution: Maitama Sule University Kano
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W7203766499