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VOL. 8, ISSUE 3 (2026)
Re – Estimating renminbi usage in cross-border payments and trade finance: Is there evidence of export intensity for trading partners?
Authors
Abdullahi Ahmed Mohammed
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.
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Pages:41-49
How to cite this article:
Abdullahi Ahmed Mohammed "Re – Estimating renminbi usage in cross-border payments and trade finance: Is there evidence of export intensity for trading partners?". International Journal of Commerce and Economics, Vol 8, Issue 3, 2026, Pages 41-49
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