The renminbi’s growing international reach is opening a new chapter in China’s financial integration with the global market. Its next stage of development will depend on more than just increasing use in cross-border trade. It will also require deeper, more liquid and internationally connected financial markets.

In a policy statement released in October, the People’s Bank of China reaffirmed its commitment to a market-driven exchange rate and greater two-way currency flexibility. One figure stood out: Around 80 percent of RMB foreign exchange trading was reported to take place offshore.

The US dollar’s dominance rests not simply on its widespread use in trade, but also on deep markets and abundant liquid assets. The RMB does not need to displace the dollar to play a more significant international role, but it does need a stronger financial ecosystem.

Hong Kong, as the world’s leading offshore RMB business center, is well positioned to help build that ecosystem.

Since the introduction of cross-border RMB trade settlement in 2009, the city has substantially expanded its markets for RMB deposits, lending, bonds and foreign exchange transactions.

Recent momentum has been encouraging. As at end-2025, RMB deposits and certificates of deposit reached 1.10 trillion yuan ($165 billion), approaching their previous peak of 1.16 trillion yuan in 2014. RMB lending and dim-sum bond issuance have also expanded strongly, reaching 930 billion and 1.10 trillion yuan respectively in 2025.

Yet much of the RMB’s offshore circulation remains tied to transactions involving Chinese mainland entities, with funds frequently returning onshore through trade and investment channels. This gateway model has served Hong Kong well. The next stage of internationalization could involve more transactions among non-mainland counterparts.

The foundations are emerging. Since 2020, the share of Hong Kong’s re-exports destined for the mainland has exceeded the share originating there, reversing the historical pattern. Alongside deeper ASEAN+3 supply-chain integration, this shift could generate greater demand for RMB settlement, financing and hedging services.

Turning that momentum into lasting international demand requires progress on three fronts.

Liquid market

The first is liquidity. A reliable international funding currency requires ready access to liquidity. This is particularly relevant to the RMB because the mainland’s partially open capital account can constrain flows between onshore and offshore markets.

In July, the Hong Kong Monetary Authority expanded its RMB business facility to 500 billion yuan and extended funding tenors to up to three years. Alongside improvements to offshore and cross-boundary bond repurchase arrangements, these measures have strengthened access to funding.

A mature offshore market also needs active interbank lending, deeper repo markets and reliable international liquidity channels. Hong Kong could become a hub connecting mainland funding sources with financial institutions across Asia and beyond.

Incentives to hold RMB

The second challenge is giving investors a strong incentive to hold RMB.

Trade settlement can bring a currency offshore, but attractive financial assets help keep it there. Offshore RMB investment opportunities remain relatively narrow, with limited secondary-market liquidity and a concentration of Chinese mainland-related assets.

Hong Kong could encourage greater issuance of renminbi-denominated bonds by foreign sovereigns, multilateral institutions and international companies. Renminbi-denominated funds tracking global equity benchmarks or markets in Japan, South Korea and ASEAN could also broaden investment opportunities.

Such products could attract international investors while allowing mainland investors to diversify overseas through established channels. They could also expand the RMB’s use in financing activities and acquiring assets beyond the mainland.

International circulation

The third challenge is building networks that allow RMB to circulate globally.

International currencies benefit from network effects: The more widely a currency is used, the more attractive it becomes. Hong Kong already has important building blocks, including Bond Connect, Swap Connect and established payment and settlement infrastructure.

Further integration of the Cross-border Interbank Payment System and Hong Kong’s Central Moneymarkets Unit with international financial infrastructure could expand the reach of offshore RMB transactions. Regional arrangements for direct exchange and settlement between RMB and other Asian currencies could broaden payment options and improve efficiency.

Digital innovation, including tokenized financial assets, offers further opportunities to improve cross-border settlement. But technology is merely an enabler: Faster payments need sufficient assets, reliable funding and willing counterparties.

Deeper offshore markets would also require attention to liquidity risks, market segmentation and cross-border financial stability, supported by appropriate safeguards and cooperation among relevant authorities. Ultimately, the RMB’s international future will depend on China’s approach to financial opening, exchange rate flexibility and cross-border capital flows. A more market-driven exchange rate and deeper hedging markets can help accommodate more diverse flows. Stronger offshore liquidity arrangements can support market development consistent with domestic financial stability and the authorities’ approach to financial opening.

Hong Kong’s opportunity lies in developing markets and infrastructure that allow the RMB to be held, invested and used more widely across the region and beyond.

The author is a co-desk economist for the Hong Kong Special Administrative Region at the ASEAN+3 Macroeconomic Research Office (AMRO).

The views do not necessarily reflect those of China Daily.