China’s RMB Internationalization Has Slowed As Stability Trumps Reform

Progress toward the Chinese RMB becoming a more important global currency has lost momentum over the last two years, notwithstanding its landmark inclusion in the IMF's Special Drawing Rights (SDR) currency basket in late 2016, says Fitch Ratings.

Policies to contain capital outflows and ongoing concerns over currency depreciation are likely to hold back internationalization in the short-term. Nevertheless, a gradual increase in holdings by reserve managers could still support China's rating profile over time.

Countries whose currencies have a significant role in global official foreign-exchange reserve portfolios are less likely to experience external funding stress, reflecting stable demand for assets denominated in their currency.

Fitch's "reserve currency flexibility" indicator incorporates this into its sovereign ratings. The ind...

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