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Recent years have seen a heated discussion over Chinese capital account liberalization and internationalization of China’s currency, the renminbi (RMB). Against the backdrop of a weak U.S. economy and China’s growing international economic clout, there has been speculation about the RMB replacing the U.S. dollar as the world’s leading currency. Subramanian (2011: 1), for instance, maintains that “the renminbi could become the premier reserve currency by the end of this decade, or early next decade.” Much of the current discourse recalls past discussions when other currencies, especially the Japanese yen (Burstein 1988; Kwan 1994; Taguchi 1994) and the Euro (Chinn and Frankel 2007), were seen as candidates to “dethrone” the dollar.
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