Internationalization of Chinese Currency

China is the largest trading nation but the majority of it is carried out in US dollars. Currently the RMB is not even the top 3 most popular international currencies. The purpose of this paper is to, without prejudice; investigate the costs and benefits for China to internationalize its national currency. The research question is “What is the benefit of international currency?” We draw from the experience of the US dollar and Euros to form the platform for our discussion. The benefits will include seignorage; macroeconomic flexibility and leverage It. would increase business opportunities for domestic financial institutions. Furthermore, allowing the Yuan to be used to settle international transactions would give Chinese residents the opportunity to avoid exchange rate risk. Additional benefits include the overall reduction of transaction costs for exporters because they would be able to trade in RMB. The cost or risk would be China would lose control over the amount of RMB in circulation and also how it is being used. Macroeconomic flexibility is a double edge sword, it cuts both ways. Internationalizing the RMB would bring a certain degree of prestige and convenience to China.