Goldman Sachs: RMB internationalization enters a 'investment-driven' new stage

Goldman Sachs released a research report pointing out that the cross-border use of the renminbi is transitioning from trade settlement to investment-driven transformation, but to truly step towards broader international currency functions, breakthroughs are still needed on three dimensions: offshore liquidity, risk management tools, and the renminbi asset pool.

The report shows that the settlement ratio of the renminbi in China's commodity trade has risen from 13% in 2019 to 30% in 2025, which is the most apparent area of internationalization progress. However, on a global scale, the renminbi's share in international payments is only about 3%-4%, its share in global official reserves is about 2%, and its share in the international bond market, measured by currency, is only 0.9%, all significantly lower than China's weight in global GDP (19%) and trade (12%).

The total volume of cross-border renminbi transactions soared from 9 trillion yuan in 2017 to 64 trillion yuan in 2024, of which capital and financial account transactions accounted for about 75%. Bond investment has become the largest single use, accounting for 46% of cross-border renminbi transactions in 2024, far exceeding trade goods at 19% and direct investment at 13%. Goldman Sachs believes that this structural transformation means that the next stage of internationalization cannot rely solely on settlement channels. It is also necessary to make it easier for foreign participants to access renminbi funds, hedge risks more conveniently, and hold more attractive renminbi assets.

Offshore liquidity stabilizes, with Hong Kong playing a core hub

Goldman Sachs believes that the next stage of renminbi internationalization will be led by the offshore market, centered in Hong Kong, rather than relying on a large-scale opening of the capital account.

Offshore renminbi liquidity has recently improved significantly. The interest rate spread between the 3-month CNH HIBOR and SHIBOR has narrowed to 15-25 basis points since April 2026, down from frequent large fluctuations within a range of 100-200 basis points. This year, the renminbi has appreciated against the US dollar by about 3%, exceeding the holding cost implied by the China-US interest rate differential of about 2.5%. Goldman Sachs forecasts that the US dollar will fall to 6.50 against the renminbi in the next 12 months, which will help maintain a stable onshore-offshore fund price difference.

On the policy side, continuous efforts are being made. In February 2025, the Hong Kong Monetary Authority launched a renminbi business financing mechanism, in September 2025, cross-border bond repurchase business was launched, and in February 2026, the central bank unified the management of cross-border renminbi financing quotas for financial institutions within the territory. These measures have jointly reduced the cost and volatility of offshore renminbi funds.

Interest rate hedging tools remain a weak link

In terms of risk management tools, foreign exchange hedging has developed relatively maturely. According to the Bank for International Settlements' triennial survey, the renminbi's share in the global gross foreign exchange derivatives market has risen from 1.0% in 2010 to 8.1% in 2025. However, interest rate hedging is seriously lagging behind, with the renminbi's share in the global gross interest rate derivatives market being only 0.8%, which has hardly improved substantially since 2013.

Goldman Sachs points out that domestic interest rate swap liquidity is concentrated in the short end and 5-year term, while treasury futures trading is concentrated in 10-year and 30-year contracts. Foreign investors were not allowed to participate in the treasury futures market until April 2026 when they were permitted to trade domestic treasury futures for hedging purposes. Hong Kong is also preparing for an offshore treasury futures market. These measures will gradually fill the gap in tools for managing long-term interest rate risk for foreign investors.

The renminbi asset pool needs to be broadened

On the asset side, China's domestic stock and bond markets have become very large in scale, with the total market value of A-shares being about 120 trillion yuan (about US$17 trillion) and the bond market's custody balance approaching 200 trillion yuan (about US$28 trillion). However, the proportion of foreign capital holding has decreased in recent years, partly due to the reversal of the China-US interest rate spread.

The development of offshore renminbi assets also needs deepening. As of April 2026, the remaining value of dim sum bonds was only about 1.4 trillion yuan,