Challenges for Chinese Companies due to Weak International Acceptance of the RMB

Abstract

Against the backdrop of accelerating economic globalization, the international acceptance of the Renminbi (RMB), while advancing steadily, continues to lag significantly behind dominant global currencies such as the United States dollar and the euro. This seminar paper seeks to address two core research questions: first, the conceptual definition, key characteristics, and principal influencing factors of a currency's international acceptance; and second, the competitive risks arising in foreign trade and the consequential impact of currency acceptance fluctuations on enterprise operations. Methodologically, the study begins by defining essential concepts, framing RMB international acceptance as the degree of market trust in its utility for payment, settlement, transaction, and reserve purposes, with exchange rates serving as the primary representative indicator. Five principal factors driving RMB exchange rate fluctuations are identified: political and economic strategies, inflation dynamics, interest rates and balance of payments, international political and economic conditions, and foreign exchange market volatility. Employing Porter's Five Forces Model, the paper systematically analyzes the competitive structure of China's foreign trade industry and further applies this framework to examine the multifaceted challenges confronting Chinese enterprises operating under conditions of weak RMB international acceptance. An empirical analysis of Sino-Japanese bilateral trade confirms a statistically significant linear correlation between RMB exchange rate movements and import-export volumes. Additionally, a detailed case study of Jiangsu Oppeal Daily Chemical Co., Ltd. illustrates concrete operational challenges, including increased import costs, supply chain instability, intensified buyer price pressure, heightened competition from new market entrants, substitution threats from lower-cost alternatives, and fiercer intra-industry rivalry.