On May 28, 2022, the Macro-Finance Salon (No. 184) was held online. Co-hosted by the International Monetary Institute (IMI) and the Department of Monetary Finance, School of Finance, Renmin University of China (RUC), the theme of the salon was “Shifting International Monetary System and RMB Outlook”.

Lu Dong, Research Fellow of IMI and Associate Professor of School of Finance of RUC, delivered a keynote speech at the seminar. The seminar was also joined by E Zhihuan, Chief Economist of the Bank of China (Hong Kong); Tu Yonghong, Dean of the Yangtze River Economic Zone Research Institution of RUC, Deputy Director of IMI; Xiao Lisheng, Director of Global Macroeconomy Research Division of the Institute of World Economics and Politics (IWEP) of CASS; Zhou Yinggang, Associate Dean and Professor of School of Economics and Wang Ya’nan Institute for Studies in Economics (WISE) at Xiamen University. The salon was moderated by Wang Fang, Associate Dean of School of Finance at RUC and Deputy Director of IMI.

On the theme of the salon, Lu Dong’s observation is threefold. The first aspect is about the general patterns of an evolving international monetary system. After the collapse of the Bretton Woods system in 1971, the current system is a Bretton Woods 2.0 with the dollar’s dominance at its core. But recent data suggest a rising status of the Renminbi in the global payments system and reserve currencies; the RMB Internationalization Index (RII) is also on the rise. Second, the world now sees a shifting international monetary landscape. While blocking some Russian financial institutions from the SWIFT may hardly affect the dollar’s status as a global payment currency, freezing Russia’s foreign exchange reserves may, to a greater extent, influence the dollar’s already declining status as a reserve currency. RMB and currencies of other emerging economies, during this time, have increased their share in reserve currencies from zero to around 10%. RMB has increasingly become an anchor currency, and a higher weight in SDR also bolsters its status as a reserve currency. The third part is about the dynamics of the exchange rate. Since the “8.11” exchange rate regime reform, RMB has displayed two-way fluctuations under the managed floating exchange rate regime. Empirical studies suggest that free floating exchange rate does not necessarily absorb external shocks, especially when mounting external uncertainties exist. With sufficient foreign exchange reserves and ample macro prudential management tools, the central bank should proactively manage the yuan exchange rate so that it can remain relatively stable at a balanced level. In the context of the Russian-Ukraine conflict and the Fed’s interest rate hikes, close attention should be paid to the depreciation pressure due to cross-border capital outflows.