The Impact of RMB Internationalization on Exchange Rate Risk in Chinese Commercial Banks

Issue  JCB, Volume 30, Number 3, 2025  Article 

Haoyu Pan
China Construction Bank Postdoctoral Research Workstation, No.35, Jinshifang Street, Xicheng District, Beijing, China
Zongbo Tian
China Construction Bank Postdoctoral Research Workstation, No.35, Jinshifang Street, Xicheng District, Beijing, China
Yingfei Huang
China Construction Bank Postdoctoral Research Workstation, No.35, Jinshifang Street, Xicheng District, Beijing, China

Abstract:

With the continuous advancement of RMB internationalization, the position of the RMB in global trade, investment, and the reserve currency system is gradually rising. The opening up of the capital account is deepening, and the volatility of the RMB exchange rate is increasing, resulting in more complex exchange rate risk management issues for commercial banks. This paper explores the impact of RMB internationalization on exchange rate risk in Chinese commercial banks and analyzes the management measures banks have taken to reduce exchange rate risk, particularly the application of digital transformation and artificial intelligence technologies in exchange rate risk management. By reviewing traditional exchange rate risk management methods and innovative applications of digital technologies, this paper points out that in the face of exchange rate volatility and the diversification of cross-border financial services brought about by RMB internationalization, banks need to use technologies such as big data analysis, automated trading systems, and machine learning to improve risk management efficiency and accuracy. Furthermore, this paper employs a multiple linear regression model to examine the impact of RMB internationalization on exchange rate risk in Chinese commercial banks. The regression results show that RMB internationalization has increased the RMB-USD exchange rate risk for Chinese commercial banks, deepening the challenges these banks face in exchange rate risk management. Through robustness tests, this paper further verifies the consistency of regression results when replacing other RMB internationalization indices. Finally, this paper provides theoretical support and practical guidance for banks on how to optimize exchange rate risk management, helping them better cope with the increasingly complex challenges of exchange rate risk.

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