On the Rise of Renminbi in Trade

Abstract

This paper examines the currency invoicing patterns of Korean exports to China using customs data and presents several noteworthy findings. Firstly, the Renminbi (RMB) has gained popularity as an invoicing currency since 2011. Secondly, products invoiced in RMB have experienced faster export growth to China. Thirdly, firms tend to choose a single invoicing currency. Finally, larger exporters are more likely to use CNY invoicing, while a few of the largest firms prefer USD invoicing. These findings are consistent with previous research (Amiti et al., 2022) that suggests firms choose an invoicing currency before an exchange rate shock to achieve the optimal ex-post markup, but are modified by the increasing returns to scale nature of currency invoicing.