The International Political Economy of

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Hyoung-Kyu Chey
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“This absorbing book, with its focus on how nations respond to the internation-
alization of China’s renminbi, breaks new ground in the study of international
currencies. Based on a mountain of empirical evidence, Chey’s analysis of ‘reactive
currency statecraft’ is cogent and persuasive. The volume deserves to be on the
book shelf of anyone with a serious interest in the political economy of finance.”
Benjamin J. Cohen, University of California, Santa Barbara

“In this fascinating book, Hyoung-​kyu Chey sheds new light on a crucial, but
neglected dimension of the politics of the RMB’s internationalization: the
reactions of foreign states. He reveals not just the varied nature of those reactions
but also how much they are influenced by broader foreign policy goals. The
lesson is clear and important: international monetary transformations are always
deeply political processes.”
Eric Helleiner, University of Waterloo

“An incisive investigation into national responses to the internationalization of

China’s currency. Chey introduces a useful theoretical framework based on the
novel concept of ‘reactive currency statecraft.’ The book’s argument and case
study evidence, which includes dozens of interviews with top political and finan-
cial officials in Japan, South Korea, the United Kingdom and the United States,
will be of great interest to scholars of international money and anyone interested
in how governments are responding to China’s rise.”
Daniel McDowell, Syracuse University
The International Political
Economy of the Renminbi

Although the internationalization of the Chinese renminbi is an important inter-

national political event, most of the studies of it place their analytical focuses
largely just on China itself, the issuer of the currency. In contrast, this book
addresses the question of how foreign states have responded to the renminbi’s
internationalization, during its initial phase through the 2010s, and thereby
breaks new ground in exploring the international politics of currency internation-
alization. It builds a theoretical framework for analyzing a state’s policy toward
renminbi internationalization, developing the key concept of reactive currency
statecraft. It then applies this framework to the four select cases of the United
Kingdom, Japan, South Korea and the United States.
This book reveals that all four of these countries have deliberately utilized their
policies related to renminbi internationalization as means of achieving their own
foreign policy goals associated with China, goals that have been principally eco-
nomic in some cases but political in others. Remarkably, the predominant mode
of response to the renminbi’s internationalization has been accommodative. Even
the United States and Japan—​China’s chief geopolitical and also international
currency rivals—​have never attempted to actively suppress it.
This study provides new insights to anyone concerned with the transformation
of the world monetary order, while also contributing a valuable analysis of the
international politics surrounding the rise of China.

Hyoung-​kyu Chey is Associate Professor of International Political Economy at

the National Graduate Institute for Policy Studies (GRIPS) in Tokyo. He is the
author of International Harmonization of Financial Regulation? The Politics of
Global Diffusion of the Basel Capital Accord (2014).
Routledge Frontiers of Political Economy

Political Economy of Financialization in the United States

A Historical-​Institutional Balance-​Sheet Approach
Kurt Mettenheim

Explaining Wealth Inequality

Property, Possession and Policy Reform
Benedict Atkinson

The International Political Economy of the Renminbi

Currency Internationalization and Reactive Currency Statecraft
Hyoung-​kyu Chey

Financialization of the Economy, Business, and Household Inequality in

the United States
A Historical-​Institutional Balance-​Sheet Approach
Kurt Mettenheim with Olivier Butzbach

Economic Ideas, Policy and National Culture

A Comparison of Three Market Economies
Edited by Eelke de Jong

Political Economy of Contemporary Italy

The Economic Crisis and State Intervention
Nicolò Giangrande

For more information about this series, please visit: www.routledge.com/​

Routledge-​Frontiers-​of-​Political-​Economy/​book-​series/​SE0345
The International Political
Economy of the Renminbi
Currency Internationalization and
Reactive Currency Statecraft

Hyoung-​kyu Chey
First published 2022
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2022 Hyoung-​kyu Chey
The right of Hyoung-​kyu Chey to be identified as author of this work
has been asserted in accordance with sections 77 and 78 of the Copyright,
Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised
in any form or by any electronic, mechanical, or other means, now known or
hereafter invented, including photocopying and recording, or in any information
storage or retrieval system, without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered trademarks,
and are used only for identification and explanation without intent to infringe.
British Library Cataloguing-​in-​Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-​in-​Publication Data
A catalog record has been requested for this book
ISBN: 978-1-032-07783-3 (hbk)
ISBN: 978-1-03-207786-4 (pbk)
ISBN: 978-1-003-21153-2 (ebk)
DOI: 10.4324/​9781003211532
Typeset in Galliard
by Newgen Publishing UK
To Noriko and Yaejoon
Contents

List of illustrations  x
Preface  xi
Acknowledgements  xiv
List of abbreviations  xvi

1 Introduction  1

2 The politics of reactive currency statecraft  19

3 The rise of the “people’s currency”  37

4 The United Kingdom: a passionate advocate  53

5 Japan: a diplomatic user of the renminbi  67

6 South Korea: a late but active accommodator  84

7 The United States: a confident hegemon  99

8 Conclusion  119

Notes  137
References  156
Index  182
Illustrations

Figures
5.1 Shares of the renminbi in Japanese trade settlement, 2011/​H2
to 2020/​H1 (%)  79
6.1 Shares of the renminbi in South Korean trade settlement, 2007
to 2020/​H1 (%)  95

Tables
3.1 Currency shares as global payment currencies, 2012 to 2020
(%, December of year)  42
3.2 Currency shares in average daily foreign exchange turnover,
2010 to 2019 (%)  43
3.3 Currency shares in total allocated foreign exchange reserves,
2016/​Q4 to 2020/​Q3 (%)  47
6.1 Renminbi-​won direct trading in South Korea, 2015 to 2019  96
Preface

Despite China’s spectacular rise in the world economy in the twenty-​first century,
its currency, the renminbi, was invisible on the international monetary scene for
a long time. Soon after the 2008 global financial crisis, however, the renminbi’s
internationalization took off—​owing to the deliberate and enthusiastic policy
support of the Chinese government, which wished to reduce its country’s heavy
reliance on the US dollar. The position of the renminbi as an international cur-
rency escalated at rapid speed through the first half of the 2010s, and in 2015 it
even overtook the Japanese yen as a global payment currency, albeit only tempor-
arily. In November 2015, the International Monetary Fund gave the renminbi its
seal of approval as a major international currency by announcing its inclusion in
the currency basket of the Special Drawing Right, along with the dollar, the euro,
the yen and the British pound, effective from October the following year. The
remarkable rise of the renminbi has attracted great attention from policymakers,
financial institutions and the media almost worldwide.
The renminbi’s internationalization has also stimulated the study of currency
internationalization, which had been largely in the doldrums for a quite extended
time despite the appearance of a few notable works. New research addressing
renminbi internationalization, frequently in connection with the future of the
dollar as the hegemonic international currency, has been pouring out now not
only from economics circles but in international political economy scholarship as
well. A kind of Renaissance of international currency study has opened thanks to
renminbi internationalization. As a result, very constructive debates have evolved
concerning the renminbi as an international currency, as well as other currencies
used internationally including the dollar in particular and also the euro from time
to time.
However, the majority of existing studies of the renminbi’s internationaliza-
tion place their analytical focuses almost exclusively on China itself, while paying
little attention to how this development has in actuality been received by foreign
states. It is certainly true that the conditions in China, the issuer of the ren-
minbi, have crucial impacts on the international reach of its own currency. That is
uncontestable. But have foreign countries all responded to the renminbi’s inter-
nationalization in an identical way? Clearly not. Although they are all affected by
the same set of conditions in China, their reactions to the internationalization
xii Preface
of the renminbi have varied. Some states have set up plans to establish offshore
renminbi centers in their territories, while others have remained more or less
indifferent to the currency.
International relations scholars have often anticipated that the emergence of
a new great power will result in a war between it and the incumbent dominant
power, especially if the rising power is a revisionist discontented with the existing
international order. So then, how about the rise of a new international cur-
rency? The political economy literature on international currencies has stressed
that a currency’s growing internationalization tends to boost its issuer’s power
significantly, implying a likely redistribution of global power due to the emer-
gence of a new international currency. How will states react to such a salient
international political event? The internationalization of the renminbi offers
an excellent opportunity to explore this significant issue, as it is progressing
in front of our very eyes. (It was in contrast about one century ago that the
dollar, the current leading international currency, began its emergence as a major
international one!)
This question is the underlying reason for this book, which offers one of the
first systematic and comprehensive studies of the ways in which foreign states have
responded to the rise of the renminbi as a new international currency, thereby
advancing scholarship on the international politics of currency internationaliza-
tion. This book develops a theoretical framework for analyzing a state’s response
to the emergence of a new international currency, with a focus on the case of
the renminbi, using what I call reactive currency statecraft as its primary con-
cept. This framework is distinctive in that it situates a state’s policy concerning
renminbi internationalization in the context of its broad foreign policy vis-​à-​vis
China, as well as its own international currency policy. While applying this ana-
lytical framework, this book conducts in-​depth empirical research on four select
countries: the United Kingdom, Japan, South Korea and the United States. It
shows that all of these countries have deliberately used their policies related to
renminbi internationalization as means of achieving their foreign policy goals
associated with China, including their economic as well as political ones. Overall,
the international politics surrounding the renminbi’s internationalization has to
date worked largely in its favor. Even the United States and Japan, China’s main
geopolitical and, also, international currency rivals, have adopted polices tol-
erant toward and/​or even supporting renminbi internationalization, rather than
attempting to suppress it.
This finding suggests that, although the renminbi’s internationalization has in
truth stagnated since the mid-​2010s, it might rebound if the currency’s financial
attractiveness can be strengthened. And in this regard Beijing has in recent years
in fact introduced a series of policy measures that could help to augment the
international appeal of the renminbi. These include the launch of the Belt and
Road Initiative, the establishment of the Asian Infrastructure Investment Bank
and the introduction of renminbi-​denominated crude oil futures and gold futures
contracts, in addition to the liberalization of domestic interest rates and expan-
sion of Chinese exchange rate regime flexibility. In the meantime, a growing
 Preface xiii
number of countries have of late intensified their efforts to lessen their depend-
ence on the dollar through “de-​dollarization,” in backlash against the increased
“weaponization” of the US currency under the Trump administration through
its aggressive deployment of financial sanctions. If this trend deepens, it could
generate conditions favorable to a rebound of renminbi internationalization. The
saga is still ongoing.
A certain limited portion of this book draws partially on my own previous
work, which contributed greatly to my developing the ideas for it. The pri-
mary theoretical concept of this study, reactive currency statecraft, which is
constructed in Chapter 2, was initially introduced in my paper “The International
Politics of Reactive Currency Statecraft: Japan’s Reaction to the Rise of the
Chinese Renminbi,” published in New Political Economy in May 2019 (available
online: www.tandfonline.com/​doi/​full/​10.1080/​13563467.2018.1461820).
The concept was not fully developed at that time, however, and this book fur-
ther clarifies its definition and develops the notion of it by classifying the possible
options available to a country that practices it. In addition, and more significantly,
in Chapter 2 of this book I build an original theoretical framework for exploring a
state’s reactive currency statecraft, something that was largely lacking in the earlier
paper. The empirical study of Japan in Chapter 5 relies partly on that paper as
well, while that on South Korea in Chapter 6 originated in part in another article
of mine, “Renminbi in Ordinary Economies: A Demand-​Side Study of Currency
Globalization,” published in China & World Economy in May/​June 2015 (avail-
able online: https://​onlinelibrary.wiley.com/​doi/​abs/​10.1111/​cwe.12111).
The research in those first two papers was, however, restricted to the period up
until the middle of the 2010s, and the studies of these nations have been sub-
stantially extended in this book to fully cover the second half of the 2010s as
well. My examination of the first half of the decade has also been significantly
augmented, with the provision of various novel details and data. Meanwhile, this
book’s empirical analyses of the United Kingdom and the United States are its
own entirely original contributions.
Acknowledgements

This book has only been possible thanks to the invaluable support that I have
received from a large number of persons and institutions, without whose
contributions it would not exist. First, the empirical research of this book relies
on extensive interviews, and I am extremely grateful to all of my interviewees,
who have provided truly vital information. They include: regarding Japan,
MURAMATSU Ken (Mizuho Securities), SHIMIZU Junko (Gakushuin
University), SHIMIZU Satoshi (The Japan Research Institute), TSUYUGUCHI
Yosuke (Shinkin Central Bank) and unnamed officials at the Bank of Japan and
the Ministry of Finance; for South Korea, AN Yu Hua (Korea Capital Market
Institute), CHOI PilSoo (Korea Institute for International Economic Policy),
HYUN Suk (Korea Capital Market Institute), JEE Mansoo (Korea Institute of
Finance), KIM Dan Joo (Standard Chartered Bank Korea), KIM Woong Ryeol
(Woori Bank), LEE Bong-​Geol (Korea International Trade Association), LEE
Chi Hun (Korea Center for International Finance), MIN Sang Kee (Seoul
Financial Forum), PARK Han Jin (Korea Trade-​Investment Promotion Agency)
and anonymous officials at the Bank of Korea and the Ministry of Economy
and Finance; for the United Kingdom, Jan Knoerich (King’s College London),
Sherry Madera (City of London Corporation), Ramon Pacheco Pardo (King’s
College London), Raymond Sabbah (Bourse Consult), James Sassoon (House
of Lords) and Paola Subacchi (Chatham House); and for the United States,
Joshua Aizenman (University of Southern California), Cathleen Cimino-​Isaacs
(Congressional Research Service), Martin Chorzempa (Peterson Institute
for International Economics), Benjamin J. Cohen (University of California
Santa Barbara), Barry Eichengreen (University of California Berkeley), Joseph
E. Gagnon (Peterson Institute for International Economics), C. Randall Henning
(American University), James K. Jackson (Congressional Research Service),
Nicholas R. Lardy (Peterson Institute for International Economics), Michael
F. Martin (Congressional Research Service), Benn Steil (Council on Foreign
Relations), David A. Steinberg (Johns Hopkins University), Edwin M. Truman
(Peterson Institute for International Economics), Martin Weiss (Congressional
Research Service) and unnamed officials at the Department of Treasury and the
Department of State.
 Acknowledgements xv
The participants in the conference on The Political Economy of Asia’s Monetary
and Financial Landscape held at the University of Southern California in March
2018, and in the workshop on Monetary Conflict and Disorder in the New Age
of Uncertainty, hosted by Cornell University in May 2018, provided useful feed-
back on the early drafts of some chapters of the book that I presented at those
forums. I thank Saori Katada, Eric Helleiner and Jonathan Kirshner, who invited
me to these excellent events, as well as all of their participants. Saori also kindly
sponsored my visit to the East Asian Studies Center of USC from April 2017
to March 2018, during which time I conducted my research on the cases of
the United Kingdom and the United States. I also owe a debt of gratitude to
HIWATARI Nobuhiro at the University of Tokyo, who taught my course at my
university during my stay at USC, as well as to the Korean Studies Institute of USC
for offering me office space at that time. I am indebted to helpful comments from
the panel members in my sessions in various International Studies Association,
Japan Association of International Relations, Korean Political Science Association
and Korea Association of International Studies conferences. I wish to also thank
Michael C. Marking for his great edits of the manuscript of this book, and
Yongling Lam and Payal Bharti of Routledge for the invaluable support of this
project that they provided. It was a delight for me to be able to work together
again with Yongling, who was the editor of my first book. Any errors that may
remain are of course my sole responsibility.
I should like to express my sincere gratitude as well to Benjamin J. Cohen, Eric
Helleiner and Daniel McDowell, for their endorsements of this book. Given that
Jerry’s and Eric’s works have been primary sources of inspiration for me in my
own study of international political economy ever since I was a college student,
their endorsements are true honors.
This study has also been supported by generous funding from the Japan Society
for the Promotion of Science (Grants-​in Aid for Scientific Research [Kakenhi]
numbers 20K01498, 16KK0076 and 26380206) and the Policy Research Center
of the National Graduate Institute for Policy Studies (Grant for Research Project
number P191RP202 and others).
Finally, I must express my foremost gratitude to my family. This book is
dedicated to my dearly beloved wife Noriko and our son Yaejoon, who are the
greatest sources of my happiness. I also cannot thank my parents enough, for
their endless support and trust.
Abbreviations

AFP Agence France-​Presse

AIIB Asian Infrastructure Investment Bank
AMF Asian Monetary Fund
ASEAN Association of Southeast Asian Nations
BIS Bank for International Settlements
BoE Bank of England
BoJ Bank of Japan
BoK Bank of Korea
BRI Belt and Road Initiative
BRICS Brazil, Russia, India, China and South Africa
CIBM China Interbank Bond Market
CIPS Cross-​border Interbank Payment System
CLC City of London Corporation
DPJ Democratic Party of Japan
ECB European Central Bank
EFD Economic and Financial Dialogue
FDI foreign direct investment
FSC Financial Services Commission (South Korea)
FTA free trade agreement
G7 Group of Seven
G20 Group of Twenty
GDP gross domestic product
IMF International Monetary Fund
KOTRA Korea Trade-​Investment Promotion Agency
L/​C letter of credit
LDP Liberal Democratic Party
MFG Mizuho Financial Group
MoD Ministry of Defense (Japan)
MoEF Ministry of Economy and Finance (South Korea)
MoF Ministry of Finance (Japan)
MoFA Ministry of Foreign Affairs (Japan)
MoND Ministry of National Defense (South Korea)
MoSF Ministry of Strategy and Finance (South Korea)
newgenprepdf

List of abbreviations xvii

MSCI Morgan Stanley Capital International

MUFG Mitsubishi UFJ Financial Group
NARK National Assembly of the Republic of Korea
PBoC People’s Bank of China
QFII Qualified Foreign Institutional Investor
RGI Renminbi Globalization Index
RQDII Renminbi Qualified Domestic Institutional Investor
RQFII Renminbi Qualified Foreign Institutional Investor
S&ED Strategic and Economic Dialogue
SAFE State Administration of Foreign Exchange
SDDS Special Data Dissemination Standard
SDGs Sustainable Development Goals
SDR Special Drawing Right
SIPRI Stockholm International Peace Research Institute
SMBC Sumitomo Mitsui Banking Corporation
SME small and medium-​sized enterprise
SMFG Sumitomo Mitsui Financial Group
SWIFT Society for Worldwide Interbank Financial Telecommunication
THAAD Terminal High Altitude Area Defense
TPP Trans-​Pacific Partnership
UNCTAD United Nations Conference on Trade and Development
WTO World Trade Organization
1 
Introduction

The history of world politics is often told as a story of the rises and declines of
different nations and regions, and the rise of China is arguably a defining event
in the international relations of our time. China’s power is growing, while voices
proclaiming an erosion of the era of Pax Americana are increasingly heard. At
this moment the question of how other countries react to this historical change
is as relevant as ever, and, indeed, is at the center of intensive debates in present
international relations scholarship.
The history of the world monetary order can likewise be told as a saga of
the ascents and descents of various international currencies. And the most
important development in recent years in this regard also involves China. It is
the international rise of that country’s currency, the renminbi (RMB, literally the
“people’s currency”), also known as the “yuan” (its primary unit of account) and
sometimes as the “redback” in parallel with usage of the term “greenback” for
the US dollar (hereafter the dollar). The renminbi’s presence in the international
currency hierarchy had for a long time been unnoticed, despite the spectacular
rise of China in the global political economy. The “people’s currency” has at
last stepped out onto the stage, however, attracting great attention from around
the world.
The internationalization of the renminbi began to take off right after the
global financial crisis of 2008, and progressed rapidly through the first half
of the 2010s. It reached a peak in the middle of 2015, when the renminbi
once even overtook the Japanese yen to rank as the world’s fourth most used
global payment currency (SWIFT, 2015b). Reflecting this stellar ascension in
the renminbi’s international standing, the International Monetary Fund (IMF)
announced in November of that year that it would be included from October
2016 in the elite currency basket of the Special Drawing Right (SDR)—​a reserve
asset issued by the IMF—​along with the dollar, the euro, the yen and the British
pound. This was a symbolic and milestone event in the process of renminbi
internationalization, meaning that the renminbi had obtained IMF certification
as a major international currency. Also notable is the fact that the renminbi’s
weight in the SDR basket (10.0 percent) is higher than those of both the yen
(8.3 percent) and the pound (8.1 percent).

DOI: 10.4324/9781003211532-1
2 Introduction
It is true that, despite its initial impressive development, the international-
ization of the renminbi is still in its nascent stage. Furthermore, its overall pace
has slowed since the middle 2010s. Nevertheless, as of November 2020 the ren-
minbi stands as the fifth most used global payment currency, surpassing both the
Canadian and the Australian dollars (SWIFT, 2020b). Moreover, its share in the
world’s foreign exchange reserves has continued to grow in the second half of
the 2010s as well, albeit quite gradually. The saga of the redback’s international
journey is still ongoing.
In the international relations literature it is frequently anticipated that the rise
of a new great power, and in particular one that is dissatisfied with the existing
international order, will lead to a war between that emerging power and the
existing dominant one.1 But how about the rise of a new international currency?
How have foreign states responded to the very significant global monetary event
of the renminbi’s internationalization? This book addresses that question, with a
primary aim of helping to advance study of the international politics of currency
internationalization. It develops the concept that I call reactive currency state-
craft, defined as a foreign state’s strategic policy toward an international currency,
and builds a theoretical framework that analyzes it from the broad perspective
of foreign policy, as well as international currency policy, with a focus on the case
of the Chinese renminbi. It then applies this framework to explore how four
particular states—​the United Kingdom, Japan, South Korea (hereafter Korea)
and the United States—​have reacted to the internationalization of the renminbi
during its initial phase through the 2010s.
This study demonstrates that the internationalization of the renminbi has to
date been essentially an international political economic event, rather than mere
economic evolution. It finds that international politics has been significantly
involved in the currency’s internationalization process. All of the case countries
have dealt with the renminbi’s internationalization strategically, in one way or
another, using it to achieve their foreign policy goals vis-​à-​vis its issuer, China.
Remarkably, the predominant form of reaction to the renminbi’s emergence as
a new international currency has been accommodative, across the case countries.
None of them—​including the United States and Japan, China’s chief geopolitical
as well as (alleged) international currency rivals—​have ever attempted to actively
suppress the currency’s international rise. Some have enthusiastically pursued pol-
icies supportive of renminbi internationalization, with aims of establishing off-
shore renminbi hubs. They have hoped to maximize their economic gains from
the growing Chinese economy by binding themselves closely with it through
expanding their uses of its currency. Other states have meanwhile sought to
obtain political gains via their renminbi-​related policies, in effect using policy
measures favorable to renminbi internationalization as diplomatic means of pro-
moting their political relationships with China.
These findings suggest that the international political conditions for the
renminbi’s internationalization have to the present time been largely favorable.
And this in turn implies that, if China successfully addresses the current major
 Introduction 3
economic weaknesses of the renminbi, we may well see a rapid re-​elevation of the
“people’s currency” in the world’s currency hierarchy.

The international politics surrounding renminbi

internationalization
A good starting point for this study may be to explicate why the renminbi’s inter-
nationalization is a central international political issue, and why it is necessary to
examine the responses of foreign states to renminbi internationalization in order
to fully understand it.

International political implications of currency internationalization

In order for the world economy to operate, the presence of a currency that can
be used for international economic activities, in other words, an international
money, is a necessity—​just as a modern national economy depends on the exist-
ence of a domestic currency. There is, however, no world government, and hence
no world currency either. In consequence, for their international transactions
market players rely on certain national currencies—​most frequently the US dollar
at this moment. Yet the matter of which currency, or currencies, plays the role
of the leading international currency has important implications for world pol-
itics. The internationalization of a currency augments its issuing state’s power
resources, and alters the international power configuration thereby.
International economic relations always generate a power dimension, as
Baldwin (1985: 60) stresses.2 And international monetary relations specifically
are no exception. To begin with a well-​known example, the internationalization
of a currency generates substantial economic benefits to the issuing state, and
economic gains are of course a fundamental source of a nation’s international
power. International seigniorage frequently appears first on the list of the eco-
nomic benefits accruing to an international currency issuer. Seigniorage his-
torically meant the profit that a country’s sovereign enjoyed when he or she
minted metals such as gold or silver into coinage. In the context of international
currencies, seigniorage refers to the profits arising from foreign holdings of the
domestic currency, and these profits generally have two sources. The first is for-
eign holdings of cash—​bank notes and coins—​which are equivalent to interest-​
free loans from foreigners made to the issuing state. No interest is paid on these
cash holdings, and the issuing state can, as a result, enjoy interest savings. The
other source of seigniorage profits is the low interest rates on financial assets
denominated in the currency—​in other words, the reduced borrowing costs for
the issuing state—​that emerge due to the high demand for these assets. Such low
borrowing costs may among other things help the state to finance its military
budget. The seigniorage benefits from issuance of an international currency tend
in reality to be not so considerable, however, especially when interest rates are
low. According to some estimates in the first decade of the 2000s, the interest
4 Introduction
savings that the United States enjoyed from the dollar notes circulating out-
side the country amounted to a mere 0.1 percent of its gross domestic product
(GDP), even though the decline in borrowing costs for dollar assets ranged from
1 to 3 percent of GDP (Cohen, 2012b: 16–​17).3
Arguably more important economic benefits from the issuing of a consequen-
tial international currency lie in the issuer’s ability to finance balance of payments
deficits with its own currency, which allows it to delay the adjustments required
by these deficits. This ability expands the issuer’s macroeconomic flexibility by
weakening the market disciplinary pressures on its economic policies. Indeed,
as is often noted, Charles de Gaulle’s economic adviser Jacques Rueff (1972)
once remarked in this regard that the United States had been able to run large
volume current account deficits “without tears,” while de Gaulle’s finance min-
ister Valéry Giscard d’Estaing referred to this as America’s “exorbitant priv-
ilege” (Eichengreen, 2011: 4). In addition, domestic financial institutions, firms
and consumers tend to benefit from the internationalization of their domestic
currency. Domestic banks and non-​bank financial institutions gain in business
owing to their privileged access to the resources of their central bank, as well as
their competitive advantages in dealing in their home currency. Domestic firms
engaged in cross-​border activities benefit by sidestepping any exchange rate risks,
which are instead borne by their foreign counterparts. Domestic consumers profit
as their purchasing powers grow along with a rise in the currency’s value due to
increased foreign demand for it.
The international use of a currency significantly enhances its issuing state’s
international power through diverse channels as well. The issuer’s policy
autonomy from other states increases, as its use of its own currency for inter-
national economic activities lowers its dependence on foreign currencies, thus
in turn reducing foreign states’ capacities to influence it. Moreover, the issuing
state’s heightened macroeconomic policy autonomy from the markets, discussed
above, gives it a greater potential to influence other states. This is because of how
its fundamental power resources are enhanced via its increased ease of utilizing
its economic resources to pursue its foreign policy goals, including paying for its
armed forces (Cohen, 2006, 2015, 2019; Oatley, 2015). In fact, while any other
state running deficits as large as the United States does might face strong market
pressures to cut its spending or raise taxes, the United States is able to main-
tain the world’s largest defense budget, to thus enjoy both “guns and butter”
(Wheatley, 2013b: 19). This US macroeconomic policy autonomy arises chiefly
out of the dollar’s reserve currency and investment currency roles—​that is, the
store-​of-​value roles—​since they create key incentives for foreigners to hold it
(Cohen, 2019: 28–​9).4
A currency’s internationalization also augments in various ways its issuer’s
ability to influence foreign actors more directly, which is perhaps the ultimate goal
of statecraft. First, a currency’s internationalization boosts its issuing state’s coer-
cive power, in other words its “hard power,” over other states, as foreign actors’
dependence on the currency for international economic activities generates sub-
stantial political leverage or advantages to its issuer. The issuing state can exercise
 Introduction 5
“currency statecraft” (Cohen, 2019) by leveraging its currency’s international
role as a tool for achieving its foreign policy goals, to either provide negative
incentives to punish unwanted behavior or positive incentives for cooperative
action. This power of an international currency arises largely from its utiliza-
tion as an international medium of exchange by private actors (McDowell, 2020;
Wheatley, 2013a: 11).
Some good instances of the exercise of this power of its currency as a stick
have been the United States’ employments of financial sanctions against hos-
tile countries, such as Iran, North Korea and Russia recently. While the dollar
is the dominant international currency and all dollar payments must be ultim-
ately cleared through the US financial system, Washington is able to exclude
any financial institution it wishes from the US-​based dollar clearing networks
(McDowell, 2020; Wheatley, 2013a: 11).5 Meanwhile, the United State’s leading
roles in dealing with the 2008 global financial crisis, in particular its provision of
dollar liquidity through the Federal Reserve’s dollar swap lines, may be a good
example of how the issuer of a leading international currency can use it as a carrot
in its foreign policy. The centrality of the dollar in global finance renders the
United States capable of exercising substantial influence over the management of
international financial crises, because it possesses an unequalled ability to provide
dollars for foreign governments and financial institutions, and can choose when
and to which foreigners it will offer them (Chey, 2012b; Helleiner, 2014, 2016;
McDowell, 2016).6
The extended international use of a currency also strengthens the issuing
state’s “structural power”—​ its power to shape the framework within which
actors operate (Strange, 1988: 25)—​helping thereby to boost its capacity to write
and rewrite the rules of the game for the world economy. The issuing state may
exploit this power proactively, but it can also be exercised even without the state’s
intent simply “by being there” (Strange, 1996: 26). For instance, the dollar’s
status as the leading international currency helps to ensure that discussions of the
international monetary system take place within the context of dollar primacy.
Furthermore, the reliance on a particular international currency tends to generate
what Kirshner (1995) calls “entrapment,” by transforming its users’ perceptions
of their own preferences in ways favorable to the issuing state’s interests. For
example, those who use the dollar tend to prefer stability in its value and close
relationships with the United States for their nations, and may try to advance
those preferences in their domestic policymaking processes, which can lead to
alterations in their nations’ policies in ways that support US interests.
In addition, the internationalization of a currency may facilitate its issuer’s
“soft power”—​its ability to get others to do what it wishes through attraction or
cooption rather than having to use coercion or payment—​given that currencies
have long been viewed as core, tangible symbols of sovereignty, and their exten-
sive international uses highly visible signs of the elevations of their issuing nations’
international statuses (Cohen, 1998: 121; Helleiner, 2006: 82). In this respect,
Wheatley (2013b: 28) describes the dollar as “an instrument in the arsenal of
Washington’s diplomatic power in much the same way that Apple products, Coca
6 Introduction
Cola, Hollywood film stars and the National Basketball Association project an
attractive image of the country worldwide and so positively influence attitudes
toward the US.”
There are on the other hand also certain costs that a state issuing an inter-
national currency is likely to have to bear. One of the most frequently noted
potential costs is the constraining of its domestic monetary policy. The large
cross-​border capital flows associated with a currency’s internationalization may
limit the central bank’s ability to control the domestic money supply and interest
rates. In addition, when foreign confidence in its currency’s value weakens, it
may need to compromise on its domestic policy goals, by adopting tighter mon-
etary policy than otherwise so as to prevent any foreign sell-​off of its currency.7
Going further, the state issuing a leading international currency is expected to
assume greater responsibility for management of the overall world economy. The
internationalization of a currency can also hurt the issuing country’s exporters
and import-​competing sectors, as increased foreign demand for the currency
may result in its appreciation. Moreover, where other countries peg their own
currencies to a particular international currency, its issuer’s ability to devalue it—​
in an attempt to boost exports for instance—​tends to weaken (Cohen, 2019: 30).
In fact, some nations such as West Germany and Japan during the 1970s and
1980s perceived those costs of currency internationalization to be so considerable
that they held negative views of the internationalizations of their own currencies
(Cohen, 2015; Henning, 1994).
However, the actual costs arising from currency internationalization might
be smaller than is conventionally discussed. The constraints on monetary policy
stemming from increased cross-​border capital flows may diminish where the
issuing state adopts a flexible exchange rate system, given that these constraints
arise from the so-​called “impossible (unholy) trinity”—​that is, the impossibility
of obtaining at the same time all three of the policy goals of a fixed exchange
rate, free capital flows and monetary policy autonomy (Chinn and Frankel, 2007;
Kenen, 2009). The risk of a drastic decline in foreign confidence in a currency’s
value tends to intensify mainly in the later phases of its internationalization, in
other words, when its internationalization is declining and it is losing its market
appeal. But when its internationalization is on the rise, foreign demand for it
in contrast grows so that the risk and the associated constraints on monetary
policy tend to be low. Also, as shown in the unilateral closing of the Bretton
Woods system by the United States in 1971, monetary hegemons have not always
behaved as responsibly as leaders as hoped (Chey, 2012a; Cohen, 1998). In fact,
the dominance of the dollar in the international monetary system has led to a
significant increase in the influence of US monetary policy over foreign econ-
omies (Bernanke, 2016; Carney, 2019).8 Moreover, the potential costs of cur-
rency internationalization are mostly economic ones, although they can of course
affect the issuing state’s political or military power as well, indirectly.
Give all of this, it is quite evident that the extensive international use of a
currency augments its issuing state’s power capacities to a substantial extent,
to thereby bend the distribution of power in the world in its favor. Devoting
 Introduction 7
attention to this power aspect of international currency, Cohen (2019: 6) argues
that whether a state pursues the internationalization of its currency depends
mainly on its possession or non-​possession of strong geopolitical ambitions. In
fact, policymakers responsible for foreign economic policies, especially those
in senior positions, appear to be well aware of these international political
implications of currency internationalization (Cohen, 2012a: 58). For instance,
one member (Cœuré, 2019) of the executive board of the European Central
Bank (ECB), often viewed as an organization of “economists,” has expressed the
view that “a currency with a global standing” would serve as “a tool to project
global influence.” From this standpoint the consequential internationalization of
the renminbi, if it is achieved, is expected to shake the power distribution of the
world by escalating China’s power significantly.

Negotiated currency
So then why should we focus attention on foreign states’ responses to the inter-
nationalization of the renminbi, going beyond consideration of the domestic
conditions in China its issuer? Whether foreign states’ policies regarding a
newly-​internationalizing currency will have substantial effects on its internation-
alization is likely to vary depending upon the factors that are driving its inter-
nationalization. In this regard, back in the early 1970s Susan Strange (1971)
presented a useful taxonomy of international currencies in terms of the primary
factors causing their international uses, by classifying them into the following
four categories: “master currencies,” “top currencies,” “negotiated currencies,”
and “neutral currencies.” This taxonomy addresses how economic and political
factors shape currency internationalization.
A master currency is the currency of an imperial or hegemonic nation that
imposes its use on other countries; its international use derives from the issuing
state’s coercive power over subordinated states. Examples include those of
British sterling in the sterling area and the French franc in the franc zone in
the past. A top currency is in contrast one that is most favored by the world
market due to its inherent economic superiority. Its international status is thus
determined predominantly by economic factors, and it tends to be the currency
of the leading state in the global economy, as in the case of the US dollar in the
1950s. Meanwhile, a negotiated currency emerges through diplomatic bargains
or negotiations between the issuing state and other states over their uses of it,
with the former sometimes offering to the latter inducements such as economic,
diplomatic or military benefits. One good example here is sterling during the
postwar period. A neutral currency, finally, is one whose international use derives
mainly from the strong but not dominant economic position of the state issuing
it, which has no interest in promoting its internationalization. The Swiss franc is
an example of a currency of this kind.
Among these four categories, negotiated currencies are the most suscep-
tible to influence by foreign states in terms of their international uses. The
internationalizations of top and neutral currencies are driven mostly by market
8 Introduction
forces, while in the case of a master currency its users are in positions subor-
dinate to its issuer. The roles of foreign states in the internationalizations of these
three kinds of currencies are thus likely to be quite limited. Foreign states can
in contrast play significant roles in a negotiated currency’s internationalization,
by influencing its uses by their domestic actors. The internationalization of a
negotiated currency is “much more directly dependent on the political choices”
of foreign states and their political relationships with the issuing state (Helleiner,
2008: 366). As a result, the fate of a negotiated currency is likely to be “less pre-
dictable and can be subject to more rapid change” (Helleiner, 2008: 366).
Although Strange herself characterized a negotiated currency basically as a
currency whose international standing is in decline, it can also be a currency that
is on the international rise. During the early stages of a currency’s internation-
alization, in fact, it is in general likely to have strong attributes as a negotiated
currency. The very fact that its usage is limited in its initial phases of internation-
alization means that it is less convenient to use than the incumbent leading inter-
national currency, which already possesses well-​established transaction networks.
The inherent economic attractiveness of a newly-​emerging international currency
may accordingly be weaker than that of the incumbent. And in this situation
the policies of foreign states in relation to the currency’s internationalization, to
either support or hinder it, may substantially influence the range of its global use
and affect its future as an international currency.
Indeed, in this early stage of its internationalization the renminbi shows
strong characteristics of a negotiated currency. It does of course have some
remarkable economic advantages as an international currency. For instance, with
China being the world’s second largest economy and accounting for the biggest
share of global trade, the potential is strong for a development of broad trans-
actional networks using the renminbi. China has also maintained low and stable
price levels over the past decades, which contributes to the building of foreign
confidence in its currency’s future value. As has been widely indicated, however,
China’s limited capital account convertibility, which constrains free cross-​border
capital flows to and from it, along with the underdevelopment of the Chinese
financial markets, significantly lower the renminbi’s own economic attractive-
ness as an international currency. It is hence obvious that the renminbi is not a
top currency. And it is not a master currency, either, as China at present has no
power to coerce other states to increase their uses of it. The renminbi also does
not belong among neutral currencies, since its internationalization to date has
relied primarily on active policy support from the Chinese government, as will
be examined in detail in Chapter 3. Meanwhile, the implementations of many
of China’s policies to facilitate renminbi internationalization have required the
formal cooperation of foreign states. This strongly suggests that the renminbi is
at this time a negotiated currency in nature. In fact, a recent cross-​country ana-
lysis by Chey and Hsu (2020) demonstrates the significant positive effects that
foreign states’ policy cooperation with China have had on renminbi use in their
foreign exchange markets.9
 Introduction 9

Long neglect of foreign states

The analysis of how foreign states have responded to the renminbi’s internation-
alization is hence of great importance for its comprehensive understanding
and, going further, for enhancing study of the international politics of cur-
rency internationalization. However, most existing research on renminbi inter-
nationalization rarely addresses this issue. The literature on other international
currencies, including the dollar, does not pay much attention to the aspect of
the international currency users either but concentrates mostly on the issuers
alone, although it does examine the international politics surrounding currency
internationalization.
Broadly speaking, the study of currency internationalization deals with two
distinct themes. One is the consequences of a currency’s internationalization,
and most research in this strand focuses mainly on the benefits and the costs
of issuing an international currency to the state issuing it. It is generally agreed
that, as discussed in detail above, the issuer of a leading international currency
enjoys significant benefits, both economic and political, although there are also
certain costs that it may have to bear. The other theme in this area of study is
the determinants of the degree of a currency’s international use. Based largely on
the findings in the work on this second theme, researchers conduct analyses of
whether a particular currency will acquire, maintain or lose its status as an inter-
national currency. This is the focus of the majority of studies of renminbi inter-
nationalization, which ultimately address its feasibility. Having already discussed
in a previous section the major findings in the research under the first theme,
I will in this section review the literature analyzing this second one. I will concen-
trate principally on the work dealing with the renminbi, but will touch on some
important findings from the studies of other currencies as well.
The study of currency internationalization has been dominated traditionally
by economists, who have presented sets of economic factors that influence a
currency’s internationalization. These consist mostly of the economic conditions
of its issuer, such as that nation’s shares in world output and trade, its degrees
of financial market development and openness, and the level and stability of its
prices.10 These conditions shape the convenience of use of the currency and the
confidence in its future value, which are two ultimate conditions affecting its
internationalization (Chey, 2014). The majority of economists observing the
internationalization of the renminbi point to China’s economic size and share in
world trade as the principal forces driving it, while indicating as the chief obstacles
to it China’s limited capital account convertibility and the underdevelopment of
the Chinese financial markets, as noted earlier.11
In recent years the political economy research on currency internationaliza-
tion has grown considerably, stimulated largely by the renminbi’s global rise.12
Similar to the aforementioned economics research, the majority of these studies
investigate the domestic conditions in a country issuing an international cur-
rency, while focusing on political economy factors. Some studies analyze the
10 Introduction
preferences of domestic actors regarding the internationalizations of their
currencies, which usually relate to the research on the costs and benefits of cur-
rency internationalization.13 Most of the works examining the preferences of
Chinese actors as to renminbi internationalization argue that major domestic
actors such as state-​owned banks and enterprises oppose it, since it will lead to
abandonment or reform of the traditional Chinese development model that has
provided them substantial benefits.14 The recent research by Chey and Li (2020)
challenges this dominant view, however, stressing that renminbi international-
ization can offer considerable benefits to those sectors as well. There is also a
body of research that addresses the impacts of domestic policies and institutions
on currency internationalization.15 The majority of the work considering these
issues in connection with renminbi internationalization tends to stress the nega-
tive effects on it of the Chinese authoritarian political system,16 or of the Chinese
development model.17
Some studies focus attention on the geopolitics associated with currency
internationalization. Posen (2008), for instance, argues that the euro is unlikely
to displace the dollar as the leading international currency due largely to
Europe’s inability to project security guarantees beyond its immediate neigh-
borhood, stressing the close relationship between currency pegging and security
ties. Likewise, Momani (2008) holds that the loyalty to the dollar of major oil
exporters in the Middle East such as Saudi Arabia is attributable largely to the
US provision of a security umbrella for them. Norloff (2014) contends that the
persistence of dollar hegemony is a result of America’s relational, structural and
socializing power. Eichengreen et al. (2017) claim that military alliances boosted
the shares of currencies in the issuers’ partner nations’ reserve holdings during the
pre-​World War I period. When it comes to the renminbi, Chey (2013) indicates
China’s weak international power vis-​à-​vis the United States as a crucial obstacle
to its internationalization, while Cohen’s (2019) recent study points to Beijing’s
geopolitical ambition as the chief driving force behind its pursuit of it.
Despite such variations in their findings and arguments, most of these studies,
including those that consider geopolitical issues, place their analytic focuses pri-
marily on the states issuing the international currencies, to thus basically adopt
“supply-​side” approaches (Chey, 2015). And there is of course no doubt that
the conditions within a nation are crucial factors affecting its currency’s inter-
nationalization. However, supply-​side research leaves out the “demand-​side” of
currency internationalization, in other words the issue of foreign actors’ responses
to international currencies (Chey, 2015). In consequence, in these supply-​side
studies foreign states play hardly any significant role in the internationalization of
a currency, and foreign actors’ motivations for using it are accordingly assumed
to be shaped exclusively by the conditions in the issuing nation (Chey, 2019). If
this were true, of course, there would be no meaningful variations in the inter-
national uses of a currency across foreign countries. Yet there are in reality signifi-
cant differences in the levels of the renminbi’s international use across countries,
influenced by foreign states’ policies related to it as demonstrated in the recent
study by Chey and Hsu (2020).18
 Introduction 11
To be sure, the importance of the roles of foreign states in currency inter-
nationalization has not been totally unnoticed in the literature. In discussing
the political factors affecting currency internationalization, Helleiner (2008),
for example, draws attention to foreign states’ roles in it. In addition, while the
focus of his study is on the policies of the international currency issuers, Cohen
(2019: 174) does recognize that a currency’s international use is ultimately
determined by the preferences of foreign actors, stressing that a state’s policy as
to its currency’s internationalization tends to succeed where that policy is con-
gruent with the preferences of the currency users, and will likely fail where it
ignores or seeks to defy them.
Furthermore, there has in recent years been a growing number of scholars,
including the author himself, who have begun devoting close attention to the
demand side of currency internationalization, with their primary focuses put on
the case of the renminbi.19 Chey’s (2015) in-​depth analysis of the use of the
renminbi in South Korea is one of the first to raise the need for a demand-​side
study of renminbi internationalization, and his subsequent study (Chey, 2019)
addresses Japan’s responses to it. Hall (2017, 2018) and Töpfer and Hall (2018)
explore the evolution of London as a leading offshore renminbi center, addressing
the UK government’s policies related to renminbi internationalization and finan-
cial institutions’ reactions to them. Pardo et al. (2019) explore the main motiv-
ations of Britain, and Germany as well, behind their policies to establish offshore
renminbi hubs. Meanwhile, Green and Gruin (2020) explain the growth of the
renminbi markets in London as having owed to the transnational market-​making
power of international financial centers, focusing on the connections between
London and Hong Kong. Chey et al. (2019) conduct a cross-​country analysis
accounting for the differences in the degrees of policy infrastructures supporting
the use of the renminbi, while, as noted above, Chey and Hsu’s (2020) study
finds significant impacts of foreign states’ policies related to the renminbi on that
currency’s uses in their own domestic markets. Liao and McDowell (2016), who
also adopt a quantitative method, examine the factors affecting foreign central
banks’ holdings of renminbi-​denominated assets. Liao and McDowell (2015)
run another regression analysis concerning the countries that have signed cur-
rency swap agreements with China, which it is suggested might affect renminbi
internationalization.
These fresh studies constitute meaningful progress in research on how ren-
minbi internationalization has been actually received by foreign actors, and
their findings do suggest that the roles of foreign states in the process of cur-
rency internationalization deserve much greater attention. Most of them have
limitations, however, in terms of their capacities to provide comprehensive ana-
lyses of the international politics surrounding renminbi internationalization from
an extensive international relations point of view. Some restrict their analyses to
very limited elements of foreign states’ policies in this regard. Moreover, many
of them tend to confine their attentions to the narrow realm of currency inter-
nationalization per se, rather than viewing foreign states’ policies toward ren-
minbi internationalization from a broad foreign policy perspective.
12 Introduction

Reactive currency statecraft toward the renminbi

This book explores how foreign states have responded to the rise of the renminbi
as a new international currency, to thus address its progress from the demand
side. To this end, it builds a theoretical framework for the analysis of a state’s
response to the emergence of a new international currency, and the renminbi in
particular. In more detail, building on Benjamin J. Cohen’s (2019) concept of
“currency statecraft,” this study develops what it calls reactive currency statecraft
as its central notion. This it defines as a state’s deliberate response to the inter-
nationalization of a foreign currency in order to achieve its policy goals, including
its foreign policy goals vis-​à-​vis the currency’s issuer as well as its policy goals
related to international currencies overall. It broadly clarifies the possible modes
of reactive currency statecraft into the three categories of accommodation, hin-
drance and noninvolvement. It then identifies the major factors that are likely
to shape a state’s reactive currency statecraft choice regarding the renminbi, by
considering the chief latent benefits that it may be able to obtain and costs that
it may have to bear from renminbi internationalization. In this regard, this study
emphasizes that the extent of each of these expected gains and losses is likely to
vary across countries, in line with their own specific domestic and international
conditions. Applying this theoretical framework, this research conducts in-​depth
empirical analyses of the reactions to the renminbi’s internationalization of four
select nations—​the United Kingdom, Japan, South Korea and the United States.
It finds that the internationalization of the renminbi up to the present time has
been a significant international political event, rather than a mere economic devel-
opment. The reactions of all four case countries have been deliberately formed
in accordance with their own overall foreign policy goals vis-​à-​vis China. Perhaps
quite surprisingly given the geopolitical rivalries between China and the United
States and Japan, as well as the expected competitions between the renminbi and
the dollar and the yen, none of the four countries have ever attempted to actively
constrain renminbi internationalization. Rather, the prevalent modes of response
to it in the United Kingdom, Japan and Korea have been accommodation, while
the United States has employed a set of policies favorable to it as well, albeit for a
relatively short time. These findings powerfully demonstrate that the case coun-
tries have all pursued gains through their accommodative policies concerning the
renminbi’s internationalization.
These gains have included both economic and political ones. In the cases of
Britain and Korea, both have aimed to build leading renminbi business centers
and accordingly employed active pro-​renminbi policies, with their primary motiv-
ations having been to maximize the economic opportunities for them generated
by the growing Chinese economy. More specifically, both countries have sought
to strengthen their economic growth by tightening their economic ties with
China via increased use of its currency, while Korea has had the additional
objective of fortifying its economic stability through a diversification of the inter-
national currencies that it relies on. The principal motives behind the US and the
Japanese policies favorable to renminbi internationalization have meanwhile been
 Introduction 13
more political. These two countries have adopted their renminbi-​friendly policies
largely as diplomatic tools for reinforcing their political relationships with China.
All of these findings imply that the international politics surrounding the
renminbi’s internationalization has been largely favorable to date, working in
its support. This means that the present limited degree of renminbi internation-
alization may be attributable mainly to the economic drawbacks of using that
currency, and that if China successfully resolves these drawbacks its international-
ization may advance significantly further.
Remarkably, despite the likely substantial impact on the international power
distribution of the emergence of a new consequential international currency, none
of the four countries studied have, in practice, viewed renminbi internationaliza-
tion to be an important security issue. They have rarely considered any potential
security risks associated with it. This finding then raises the important question
of the extents of the impacts of states’ security relations on a currency’s inter-
nationalization, given that a good number of previous studies of currency inter-
nationalization have reported such impacts. At the same time, this finding may
suggest that during tranquil times a state tends to focus on the potential eco-
nomic gains to it from the rise of a new international currency rather than on
any latent associated security costs. This tendency may be especially strong in the
early stages of a currency’s internationalization, when there is a high degree of
uncertainty as to the actual consequences should its internationalization reach a
consequential level in the future.
Also, although Britain and Japan are the issuers of incumbent major inter-
national currencies, and Korea has wished to achieve greater international use of
its own currency, none of these three countries have expected significant adverse
effects of renminbi internationalization on their currencies’ international uses.
Japan and Korea have in fact hoped that their renminbi-​friendly policies will
serve to facilitate the international uses of their own currencies as well. In the
case of the United States, meanwhile, a tolerance of renminbi internationaliza-
tion has been possible even despite its determination to preserve dollar primacy,
due to its strong confidence in a low redback likelihood of seriously challenging
the greenback’s global supremacy. These analyses show that the alleged rivalries
between international currencies do not necessarily affect their issuers’ policies
toward other such currencies.
While this book’s main interest is the analysis of state policy, it also devotes
considerable attention to how private actors, including both financial and non-​
financial firms, have reacted to the internationalization of the renminbi. And in
this regard it finds that most of these actors have had little interest in using the cur-
rency, since it is not economically attractive in this initial phase of its internation-
alization, especially in terms of its convenience of use. Accordingly, firms have
rarely become engaged in their national policies toward the renminbi, but largely
left their formation to their governments’ own policy choices. Exceptionally, a
small number of large and internationally active financial institutions have had
keen interests in developing renminbi businesses. They have, however, been able
to carry out these businesses effectively through established offshore renminbi
14 Introduction
centers in foreign economies such as Hong Kong, while the chief interests of
many of them have been to expand their operations in the mainland Chinese
financial markets as well. They have thus hardly put any strong pressures on
their governments to promote renminbi use in their own home country markets,
although they have on the whole cooperated with their governments’ policies to
this end.
This study investigates in addition the effects of foreign governments’ policies
concerning renminbi internationalization, and their limitations. The active policy
measures of the United Kingdom and the Korean governments to build offshore
renminbi hubs have caused somewhat meaningful expansions in renminbi use in
their domestic markets. However, the expansions in both countries have largely
stalled, with the overall stagnation of renminbi internationalization worldwide
since the mid-​2010s. This shows that, while political forces can have significant
impacts on the renminbi’s global use, they cannot entirely overwhelm market
forces. The internationalization of the renminbi has been shaped by both states
and markets.
These findings make significant theoretical and empirical contributions to the
literature in the following three respects. First, they advance the study of the
international politics of renminbi internationalization in particular and, going
further, that of currency internationalization in general, by building a systematic
theoretical framework that explains a foreign state’s response to the renminbi, a
newly-​internationalizing currency issued by a rising power. This theoretical frame-
work is innovative in that it situates a state’s policy toward renminbi internation-
alization in the context of its broad foreign policy framework, going beyond
the narrow realm of currency internationalization per se. Also, in building its
analytical framework, this study draws partly on the literature on the relation-
ship between economic interdependence and international cooperation/​conflict,
and that on alignment behavior and alliance formation, as well as the literature
related to currency internationalization. It therefore strengthens the connections
between the first two bodies of scholarship and the latter.
Second, this research offers deep and comprehensive empirical examinations of
the reactions of the four case countries to the international rise of the renminbi.
To my knowledge this is the first systematic analysis of the response of the United
States to renminbi internationalization. Given that the United States is the issuer
of the current leading international currency, the dollar, and China’s chief geo-
political rival as well, there is no doubt that it is one of the most important for-
eign states in connection with renminbi internationalization. Quite surprisingly,
however, there has even so been little robust research on how Washington has
coped with the renminbi’s international rise. In addition, although there are some
recent papers—​including the author’s own previous works—​that have examined
the other case countries’ reactions to renminbi internationalization, the scopes
of their analyses have been limited: few cover the period of the second half of
the 2010s, and in some of them the ranges of the government policies that they
examine are restricted. This research substantially supplements and complements
those earlier studies.
 Introduction 15
Finally, this research may offer useful insights for the broader literature on the
international politics surrounding rising powers. The rise of China has been at the
center of debates among international relations scholars ever since the Cold War
ended. Yet most studies of the international politics surrounding the growth in
Chinese power tend to focus chiefly on the security relations between China and
other states—​especially the United States—​while neglecting their interactions in
the currency sphere (although many do recognize that the dollar’s dominant pos-
ition in the international financial system is a key underlying source of US power).
As with the question of how a hegemon responds to a rising power, that of how
the issuer of the hegemonic currency deals with the emergence of a potential rival
is apparently of great interest and importance. This research helps the studies
mentioned to enlarge their analytical ranges to incorporate the currency realm.

The approach
The theoretical framework of this study is built for the purpose of analyzing a
foreign state’s response to the rise of a new international currency, given that the
renminbi’s internationalization is still in its early stage. The internationalization of
a currency is an evolutionary process that has a life cycle (Cohen, 2019: 38–​40),
and how a foreign state copes with that currency may differ depending on the
degree of its internationalization. Analysis of foreign states’ responses to an inter-
national currency might thus require differing analytical frameworks depending
upon the phases of its evolution. This is an aspect of the global politics of cur-
rency internationalization that has not been much noted, at least not explicitly, in
the existing studies. In contrast to them, this study clarifies overtly that its analysis
aims to examine the current early stage of the renminbi’s internationalization,
covering its first decade throughout the 2010s. The early phase of a currency’s
internationalization may be the most important for its life as an international cur-
rency, given that it may be determined during this time whether the currency can
evolve into a major one or not.
The principal method used in this research is comparative study. It focuses
mainly on the cases of four select countries: the United Kingdom, Japan, South
Korea and the United States. Given that these countries are all democracies
having advanced economies, they make up comparable cases. Moreover, with
these particular countries there are opportunities for comparative analysis from
diverse angles. First, although all four of them have substantial economic ties
with China, there are notable variances among them in the degrees of those
ties, which might be expected to lead to differences in their policies toward ren-
minbi internationalization. Second, the United States and Japan are China’s chief
geopolitical rivals at the global and the Asian regional levels, respectively, while
the United Kingdom and Korea are not involved in any serious political or mili-
tary rivalries with it. Third, the United Kingdom, Japan and Korea are all close
allies of the United States, allowing an analysis of whether their political and
security relations with that country significantly affect their policies toward the
renminbi’s internationalization. Fourth, the United States is the issuer of the
16 Introduction
dollar, the incumbent predominant international currency, while the Japanese
yen and the British pound are second-​tier major international currencies and the
Korean won is not internationalized. This study can thus consider whether the
rivalries between these currencies on the world stage have meaningfully affected
their governments’ responses to renminbi internationalization. Fifth, and lastly,
the United States and Britain possess top global financial centers—​New York and
London—​while in contrast Tokyo’s status as a global financial center is signifi-
cantly lower and Korea has not yet developed a global or even a regional finan-
cial center. It will be of interest to see whether these differences have caused any
meaningful variations in the countries’ renminbi-​related policies.
The analysis of the case countries relies mainly on in-​depth qualitative research,
including extensive interviews with government officials, financial institutions,
non-​financial corporations and local experts, on top of the examination of pri-
mary documents, published in the local languages as well as in English for the
cases of Japan and Korea. The interviewees’ institutions include—​but are not
limited to—​the US Treasury, the US Department of State, HM Treasury of the
United Kingdom, the House of Lords of the United Kingdom, the Japanese
Ministry of Finance, the Korean Ministry of Economy and Finance, the Bank of
Japan (the Japanese central bank), the Bank of Korea (the Korean central bank),
the City of London Corporation, the Congressional Research Service (USA), the
Council on Foreign Relations (USA), the Peterson Institute for International
Economics (USA), Chatham House (UK), the Japan Research Institute, the
Korea Center for International Finance, the Seoul Financial Forum, the Korea
Institute of Finance, the Korea Trade-​ Investment Promotion Agency, Korea
Capital Market Institute, the Korea Institute for International Economic Policy,
the Korea International Trade Association, JPMorgan Chase Bank (USA), Citi
(USA), Wells Fargo (USA), Bank of America (USA), HSBC USA, Industrial
Commercial Bank of China USA, Bank of China USA, MUFG Bank (Japan),
SMBC (Japan), Mizuho Bank (Japan), Shinkin Central Bank (Japan), Mizuho
Securities (Japan), Woori Bank (Korea), Korea Exchange Bank and Standard
Chartered Bank Korea.

Caveats
At this point the limitations of this study should be explicitly noted. One of them
is that, since it deals with only one currency, generalizing from its findings might
not be warranted. It should be emphasized, however, that there have been only
two truly global currencies in modern history—​the British pound and the US
dollar—​and so the number of actual cases that allow empirical research is very
limited by default. Moreover, the times when those currencies began to rise as
international currencies were during the period of the gold standard, and their
values were accordingly backed by gold. Today’s renminbi is in contrast a fiat
currency, and not supported by any precious metal. Strictly speaking, therefore,
the internationalization experiences of the pound and the dollar might not be
comparable with the case of the renminbi. From this point of view, the renminbi’s
 Introduction 17
internationalization is thus actually likely to provide valuable insights for the
internationalizations of other currencies in the future, and the final chapter of
this book discusses the applicability of its findings to other cases. It should be
stressed in addition that the renminbi is a quite important case in itself, given
that it is widely anticipated to become the third truly global currency someday,
although there is large disagreement as to how much time the realization of this
might take.
Perhaps a more important downside to this study is the limitation of its empir-
ical cases to advanced economies only, although this has an advantageous aspect
as well in making their cases more comparable. The responses of less developed
economies to renminbi internationalization might differ from those of advanced
economies: there might for example be reasons for the former to have greater
interests in using the renminbi than the latter. However, in examining less
developed economies there is the serious practical obstacle that most of them do
not publish data on their domestic uses of the renminbi, while some do not even
collect it. Due in part to this practical problem, this study does not consider any
of these countries.
Meanwhile, as this research adopts an essentially rationalist approach, its ana-
lysis largely excludes ideational factors such as norms and beliefs. It does address
them when necessary, however, although it does not fully incorporate them into
a constructivist analysis.
Finally, the research period of this book is up to late 2020, when I completed
its manuscript. At around the time of the manuscript’s completion some not-
able new factors had appeared that may affect the renminbi’s internationalization,
including the global spread of the coronavirus disease 2019 (COVID-​19) and the
victory of Joseph R. Biden, Jr. in the US presidential election. Therefore, at the
very last stage of writing this book I added at the end a brief discussion of their
potential impacts on renminbi internationalization. However, these impacts are
likely to take place through various channels and over multiple years to come, and
systematic research on them is thus beyond the scope of this study.

The plan of the book

The rest of this book is structured as follows. The next chapter, Chapter 2, is the
theoretical core of the study. It defines the concept of reactive currency statecraft
in detail, and builds the analytical framework that explains a state’s policy toward
the internationalization of the renminbi, clarifying the primary factors that may
shape its policy. Then, prior to undertaking the research on the four empirical
cases, Chapter 3 provides the necessary background information concerning
renminbi internationalization, by providing an overview of the development of
the renminbi as an international currency until the present day. It first analyzes
the supply side of renminbi internationalization, by exploring why and how the
Chinese government has promoted it. It then assesses the current status of the
renminbi as an international currency, and going further discusses the recent
developments that may affect its internationalization in the coming years. This
18 Introduction
chapter stresses that the internationalization of the renminbi is still an ongoing
process.
Thereafter, the following four chapters, Chapters 4 to 7, present close empir-
ical studies of the United Kingdom, Japan, South Korea and the United States,
respectively. This analytical order of the countries reflects the sequence of the
times when they first began to adopt significant policies connected with ren-
minbi internationalization. The United Kingdom was among the first economies
in the world that worked to establish an international center for the renminbi
business, and its policy to achieve that goal was introduced from the beginning
of the 2010s, soon after China launched its push for renminbi internationaliza-
tion. Maybe surprisingly, among the remaining three countries it was Japan that
adopted policies supportive of renminbi internationalization next after Britain,
with a gap between them of only a couple of months. Meanwhile, although Korea
is China’s next-​door neighbor it remained indifferent to the internationalization
of the renminbi during the early 2010s. However, as the global competition to
build offshore renminbi hubs intensified, it also joined that competition from the
mid-​2010s. The United States had remained neutral to the rise of the renminbi
as a new international currency for a longer time than any of the other case coun-
tries. Yet, perhaps unexpectedly, it did introduce a few notable measures favor-
able to the currency’s internationalization in the middle of the 2010s, although
shortly afterwards its policy returned to its initial stance of noninvolvement.
Each of these four chapters describes the respective case country’s policy
concerning the internationalization of the renminbi, and analyzes its main motiv-
ations behind that policy. Each also examines how firms in the country concerned,
both financial and non-​financial, have reacted to the renminbi’s internationaliza-
tion, as well as the degree of renminbi use in that country, based upon available
data. The final chapter, Chapter 8, summarizes the major findings of this study,
and articulates its contributions to the study of currency internationalization and
to the other relevant literature as well. It then closes with a discussion of the
future of the renminbi’s internationalization and of the world monetary order,
with particular attention paid to the recent efforts aimed at de-​dollarization seen
around the world.
2 
The politics of reactive currency
statecraft

This chapter builds the analytical framework that will be used for this study of
how foreign states respond to the emergence of a new international currency
issued by a rising power, specifically the Chinese renminbi. It first defines the
key concept on which the analysis is based, that of reactive currency statecraft,
and clarifies the possible policy options available to states as means of responding
to a newly-​internationalizing foreign currency. Thereafter, it explores the major
factors that may determine states’ choices from among these options, by exam-
ining the potential chief benefits and costs to them associated with those choices.1

Reactive currency statecraft

The principal concept in the theoretical framework of this study is that of reactive
currency statecraft. This notion was initially presented in my earlier study (Chey,
2019), but at that time its meaning was not fully developed. This book further
elaborates the definition of this concept, and develops it fully by classifying the
policy options involved in it and explaining how it is shaped.

Concept
The notion of reactive currency statecraft in this study builds on Cohen’s (2019)
concept of “currency statecraft,” which he says is “about what a country chooses
to do—​or not to do—​when its money comes to be used across borders.” Cohen
defines currency statecraft as “a government’s management of its currency instru-
ment,” stressing that the internationalization of a currency provides its issuer
with a tool for use in promoting its policy goals in global affairs, and that the
issuer decides whether to promote, hinder or remain neutral to its international-
ization. This definition of currency statecraft has four elements. First, it stresses
that currency statecraft is “intentional,” meaning that it involves “willful acts” or
“willful decisions not to act.” Second, it identifies currency statecraft as a matter
of “public policy,” initiated by a state rather than by market actors or civil society.
Third, currency statecraft is said to be “purposive,” having specific ends. Finally,
it refers to the “management” of a currency.

DOI: 10.4324/9781003211532-2
20 Politics of reactive currency statecraft
Currency statecraft is thus one specific aspect of the broader area of “economic
statecraft” (Baldwin, 1985), the management of economic instruments to obtain
foreign policy goals. More specifically, it is one facet of “financial statecraft,” a
subcategory of economic statecraft that refers to a state’s use of its monetary
and financial capabilities for that same purpose (Armijo and Katada, 2014, 2015;
Roberts et al., 2017). Cohen articulates three broad policy options available to a
government for its currency statecraft, applicable in each of the three evolutionary
stages—​“youth,” “maturity” and “decline”—​of the life cycle of an international
money: the government can be proactive either in favor of or in opposition to the
internationalization of its currency, or it can decline to take either position but
remain passive (Cohen, 2019: 40).
All four of the conceptual elements of currency statecraft apply to reactive
currency statecraft as well. However, in contrast to Cohen’s concept of currency
statecraft, which relates to the policy of the issuer of an international currency
concerning its own currency, reactive currency statecraft turns attention to the
policy of a state toward an international currency issued by a foreign state. It is
hence an intentional action or non-​action with respect to an international cur-
rency issued by a foreign nation; it is a policy adopted by a government; it has
a clear policy goal(s); and it involves the management of a foreign international
currency. Reactive currency statecraft is accordingly defined in this study as a
state’s strategic response to an international currency issued by a foreign state, in
order to achieve its own policy goals. The policy space for reactive currency state-
craft tends to be larger in the early stages of a currency’s internationalization, in
particular when it is a negotiated currency, since, as discussed in the preceding
chapter, its internationalization is more likely at this time to be influenced by for-
eign states’ policy choices toward it.

Policy options
Which policy options are available to a state in its reactive currency statecraft? In
the early phase of a currency’s internationalization, the policies that its issuer can
choose to pursue as means of currency statecraft involve either promotion, pre-
vention or permission (Cohen, 2019: 41). The state can as one option seek to
promote its currency’s international use, in order to obtain the potential related
benefits. Conversely, if concerned about the possible costs of its currency’s inter-
nationalization, it can work actively to prevent it. Finally, the issuer can choose
simply to permit the currency’s internationalization to proceed as it will, while
avoiding any intervention in the process (Cohen, 2019: 41).2
Similarly, the reactive currency statecraft options available to a state for
responding to a newly-​ internationalizing currency of another country can
be divided into three broad categories: accommodation, hindrance and
noninvolvement. A state can actively accommodate the internationalization of a
foreign currency by adopting policies that support it. In contrast, it can instead
deliberately attempt to hinder a currency’s internationalization. Alternatively,
of course, the state can intentionally avoid any direct engagement affecting the
 Politics of reactive currency statecraft 21
international use of a foreign currency in either way, thus tacitly endorsing the
currency’s internationalizing at its own pace.
Accommodative reactive currency statecraft can be pursued in two distinct
ways: unilaterally or through collaboration with the issuer of the international
currency. A state can introduce unilateral measures that help the internationaliza-
tion of a particular foreign currency. It can do so directly, for example, by encour-
aging increased use of the currency by its public actors. A primary measure in this
regard will likely be an expansion by its central bank in the currency’s use. Other
public agencies, such as sovereign wealth funds and pension funds, can increase
their investments in financial assets denominated in the currency as well. A state
can also adopt more indirect unilateral measures that provide or strengthen the
incentives for domestic private actors to heighten their uses of the currency, by
for instance altering domestic regulations in ways that promote this. Meanwhile,
a state can also cooperate formally with the issuer of the currency in collaborative
measures to encourage its domestic actors’ use of it, by for example introducing
cooperative channels through which the issuer can provide the currency to them.
The scope of the policy measures available for hindrance reactive currency state-
craft is likely to be narrower than that for the accommodative option. Unilateral
measures to hinder a foreign currency’s internationalization are unlikely to be
readily available in democratic countries, since there are in normal times few
means of preventing a domestic private actor’s voluntary use of any specific inter-
national currency. For example, it is hard to imagine the US or the Japanese
governments prohibiting renminbi usage by their firms, barring adoptions by
them of economic sanctions against China that included such a condition. This
also suggests the difficulty of putting strong pressures on other states to actively
dissuade them from using a certain international currency. Ultimately, one most-​
likely policy that a state can take to proactively hinder the internationalization of
another’s currency may be to pressure other states to avoid actively encouraging
its use. This policy will engender substantial political burdens or costs to the state
adopting it, in terms of its relationships with the issuer of the currency as well
as those with the other states subjected to its pressure. These high costs will not
completely prevent the exercise of hindrance reactive currency statecraft, but only
a very limited number of states are likely to have capacities to attempt it.
In contrast to the accommodation and hindrance options, noninvolvement
reactive currency statecraft does not entail any particular policy actions. A state
adopting this position remains indifferent to or tolerant of the internationaliza-
tion of the currency in question. It does not make any overt efforts to alter
the preferences of domestic or foreign actors concerning that currency’s use,
but merely accepts as a bystander however the currency’s internationalization
develops, without becoming directly involved in it.

Policy choices and goals

Which policy option will a state opt for as its reactive currency statecraft vis-​à-​
vis the renminbi’s internationalization? A state’s decision on how to respond to
22 Politics of reactive currency statecraft
renminbi internationalization is likely to be affected largely by the benefits and
costs to it that it expects will result. Where a state anticipates significant benefits
and only limited costs, it will employ an accommodative policy. Where the
expected gains are in contrast small but the estimated losses substantial, a state
will adopt the hindrance option. And where the benefits and the costs are both
either marginal or uncertain, it will likely choose noninvolvement. Therefore, a
quintessential issue shaping a state’s reactive currency statecraft concerning the
internationalization of the renminbi is the question of which benefits the state
seeks to obtain with regard to it, and which costs it wishes to avoid.
This question relates to the policy goals of reactive currency statecraft. The
expected gains are the positive policy goals that the state wishes to achieve, while
the expected losses are the negative policy goals that it wishes to avoid. Given the
nature of reactive currency statecraft as a response to an international currency,
and specifically a foreign international currency, the major policy goals of a state’s
reactive currency statecraft consist of two broad categories: those related to its
foreign policy goals vis-​à-​vis the issuer of that currency, and those associated with
its policy concerning international currencies in and of themselves. Although
there might be other policy goals as well, they seem unlikely to be common cases.
In line with this, therefore, some of the expected benefits and costs associated
with renminbi internationalization are connected primarily to a state’s foreign
policy goals vis-​à-​vis China, while the others relate principally to its policy in
relation to international currencies, including, but not limited to, the renminbi.
Meanwhile, the anticipated magnitudes of each of the potential benefits and
costs will differ across countries. A state’s particular choice of reactive currency
statecraft concerning renminbi internationalization will thus be decided based
upon which potential benefits and/​or costs have the highest values to it, in other
words, which policy goal(s) it most wishes to achieve.

Determinants
Then, which specific benefits or costs can a state expect to receive or to have to
bear with regard to the internationalization of the renminbi? In other words,
which policy goal(s) will a state be likely to pursue in connection with that pro-
cess? In addressing this issue, this study draws attention to three specific types
of potential benefits—​two economic and one political—​and to two kinds of
likely costs—​one political and one economic. Some of these relate mainly to a
state’s foreign policy goals toward China, and the others to its policy objectives
regarding international currencies. Which benefits or costs are associated with
which policy goals will be noted below, in discussion of the specific benefits and
costs concerned.
This analysis of the benefits and costs to foreign states stemming from ren-
minbi internationalization draws partly on the literatures on the impacts of eco-
nomic interdependence on international cooperation/​conflict, and on alignment
behavior and alliance formation, as well as the literature on currency internation-
alization, and thereby connects the latter to the former two. In studying state
 Politics of reactive currency statecraft 23
behavior, realists and liberals adopt opposing assumptions. The former believe
that states try to maximize their security, while the latter argue that they are
interested most in welfare maximization. In contrast to these perspectives, this
study supposes that states pursue both security and wealth, which seems a more
realistic position.

Expected gains
The major potential benefits that a state may seek to gain from renminbi inter-
nationalization can be divided into economic and political ones. The main eco-
nomic benefits can be further classified into two distinct categories. One is growth
thanks to the state’s strengthening of economic ties with China via increased use
of its currency, and the other is stability through the diversification of the inter-
national currencies that it uses. A state’s pursuit of the former belongs largely in
the realm of its foreign policy vis-​à-​vis China, since it is based fundamentally on
its policy concerning China, while its quest for the latter relates to its international
currency policy. Meanwhile, the chief political gain that a state can expect here is
the building of a better political relationship with China, which constitutes a part
of its foreign policy toward that country.
In greater detail, when the issuer of a new international currency is a rising
economic power, a foreign state may attempt to maximize its own economic
opportunities arising from the issuer’s rise by reinforcing their economic relations
through encouraging increased use of the currency by its own domestic actors.
In explaining alliance formation one group of studies argue that the main
motive for such “bandwagoning” is the opportunity for profits or gains, rather
than security.3 They note that positive inducements are “the most effective
means to induce bandwagoning behavior” (Schweller, 1994: 88–​9), and that
a bandwagoner “anticipates the advantages of being on the winning side”
(Schweller, 1994: 106–​7). Likewise, the motivation for economic gains from the
issuer of a newly-​internationalizing currency may be a strong driving force behind
a state’s accommodative policy toward the currency’s internationalization, in par-
ticular where it is issued by a growing economic power. Growth in a country’s use
of a foreign currency in its economic activities with the issuer is likely to reduce
the transaction costs of these activities, and lead in turn to increased economic
exchanges between the two countries. A state may therefore wish to bolster its
own economic growth through an expansion in use of the currency of a rising
economic power when that currency is internationalizing. In fact, the literature
on currency internationalization stresses a country’s shares in world GDP and
trade as two of the most crucial economic conditions determining the inter-
national appeal of its currency.
Over the past decades the Middle Kingdom has emerged as a new center for
acquiring economic gains. China overtook Japan in 2010 as the world’s second
largest economy, and as of 2019 accounted for about 16 percent of the world
economy. If the current disparity in growth rates between China and the United
States continues, the Chinese economy is expected to match that of the United
24 Politics of reactive currency statecraft
States by 2027, and grow to twice its size within less than two decades (Lobell,
2016: 34; Smith, 2017).4 China is also the world leader in merchandise trade,
with shares of 13 percent of the world’s total exports and 11 percent of its total
imports as of 2018 (WTO, 2019). China had by 2015 become the biggest
trading partner of 67 countries (Anderlini and Parker, 2015), and has taken over
from the United States as the leading trading counterpart of the majority of Asian
countries (Ikenberry, 2016: 10, 20). The nation’s role in world investment has
grown remarkably as well. It absorbed more than 10 percent of total foreign
direct investment (FDI) inflows in the world in 2018, and sent out about 13 per-
cent of total FDI outflows (UNCTAD, 2019).
As China has become a chief source of economic gains, new opportunities to
increase their economic benefits from its rise have appeared for foreign coun-
tries, pulling them into its orbit to share in its prosperity. Many foreign coun-
tries have sought to capture these opportunities by bolstering their economic
ties with China through expanded trade and investment. In this regard, the
influential international relations scholar G. John Ikenberry (2016: 29) remarks
that countries “are seeking to get ‘inside’ the Chinese economic miracle and
become mutual beneficiaries.” David Shambaugh (2013: 315), an authority in
China study, opines that “the interdependence and benefits of interaction and
commerce with China are irreversible.” In these circumstances, a state’s policy to
reinforce its economic ties with China by heightening its use of the renminbi may
be an effective means of bandwagoning on China’s economic growth.
Moreover, in line with the growing Chinese influence in the global economy,
a number of sanguine forecasts for the renminbi’s future as an international cur-
rency have appeared, while some scholars have also anticipated a decline in the
hegemony of the United States and the dollar.5 There is of course an opposing
camp as well, which predicts the persistence of dollar supremacy for the foresee-
able future.6 Yet most observers tend to agree that the renminbi will be a conse-
quential international currency someday, although when this may actually happen
has been controversial.
The positive forecasts for the renminbi’s future were particularly strong just
before and during the first half of the 2010s, when its internationalization was
indeed making notable progress. In 2009, for instance, the major global bank
HSBC estimated that by 2012 about 40–​50 percent of China’s trade would be
settled in renminbi (Subacchi, 2017: 110–​11). A report (Qu et al., 2010: 1)
published by that bank in the following year then analyzed that “… The world
economy is, slowly but surely, moving from greenbacks to redbacks.” Another
HSBC report (Qu et al., 2016: 34) published six years later maintained this pos-
ition, remarking that “The international monetary system is changing, catalyzed
by the rise of the redback, among other things. … Given the vulnerabilities and
imbalances associated with the current system, an opportunity for reform should
be welcomed.” The influential weekly newspaper The Economist also pronounced,
in April 2014, that “The globalization of the yuan seems remorseless and unstop-
pable” (as quoted in Steil and Smith, 2017: 43). A group of academics as
well agreed on the rosy prospects for the renminbi, one good example being
 Politics of reactive currency statecraft 25
Subramanian’s (2011) book Eclipse: Living in the Shadow of China’s Economic
Dominance, which attracted great attention while projecting that the renminbi
would rival or even overtake the dollar as the world’s key reserve currency by the
early 2020s. In hindsight, these forecasts were of course excessive, but it seems
likely that at those times they may have stimulated foreign states’ motivations to
enhance their economic gains through renminbi use.
Of course, the degrees of the motivations for pursuing pro-​renminbi pol-
icies for the sake of economic growth are likely to differ across countries. Where
a country’s economic dependence on China is high, or where it wishes to
strengthen their economic ties, it is likely to have greater interest in using the
renminbi. Indeed, a recent study by Chey and Hsu (2020) found that renminbi
use is higher in countries that have larger shares of trade with China, and exports
to it in particular, relative to their total trade volumes. Chey et al. (2019) also
show that a nation that has signed a preferential trade agreement with China
tends to work to facilitate use of the renminbi by its own domestic actors. States
realizing substantial economic gains from China, or pursuing them, are likely to
have strong incentives for adopting accommodative reactive currency statecraft
toward renminbi internationalization.
The other type of economic benefits that a state may aim to acquire in
connection with the renminbi’s internationalization is more directly related to
its policy concerning international currencies: a certain group of countries may
seek to promote their own economic stability by heightening their uses of the
renminbi, as this diversifies the international currencies that they can rely on. All
else being equal, the motivation to achieve this policy goal will likely be stronger
in countries that have difficulties in obtaining dollar liquidity during emergen-
cies, when that is critical for avoiding foreign exchange crises. These countries
may include a large number of emerging economies. And in this regard, it is a
telling fact that during the 2008 global financial crisis more than 20 emerging
economies were victimized due to their shortages of dollar liquidity, despite their
having had otherwise strong economic fundamentals and pursued sound eco-
nomic policies (Bi and Lanau, 2011). Although the US Federal Reserve did offer
dollar liquidity through temporary dollar swap lines to some emerging econ-
omies during the crisis, in addition to ten advanced economies, their number was
limited to four. The Fed actually rejected requests for dollar swap lines from sev-
eral emerging economies (Prasad, 2014: 207–​9). In October 2013, the Federal
Reserve did then establish standing dollar swap lines, but only with the central
banks of five core advanced economies (the ECB, the Bank of Canada, the Bank
of England, the Bank of Japan and the Swiss National Bank).
In addition, discontent with the adverse international effects of US monetary
policy has grown in recent years. The dollar is currently used in more than one-​
half of international trade invoices, which is about five times the US share in
world goods imports and three times its share in world exports. However, the
widespread use in trade invoicing of the dollar, rather than the currencies of either
the exporters or the importers—​a practice known as “dominant currency pri-
cing”—​leads import prices to be affected by the bilateral exchange rate between
26 Politics of reactive currency statecraft
the local currency and the dollar, rather than that between the local currency and
the exporting country’s currency. As a result, import prices tend to not adjust
efficiently to reflect changes in relative demand between trading partners, which
weakens the ability of floating exchange rates to absorb external shocks (Carney,
2019). Moreover, owing to the predominance of the dollar in global banking
and finance, developments in the US economy can have large spillover effects
on the rest of the world through the financial markets. Emerging economies in
particular can face volatile capital flows, which make them more vulnerable to
external shocks and force them to sacrifice their domestic monetary policy goals
(Carney, 2019).7 In this circumstance, it may make sense for a state to attempt to
boost its economic stability through a reduction in its dependence on the dollar.
And in fact, as will be discussed in the final chapter, voices supporting a multi-
polar international monetary system to replace the current dollar-​dominated uni-
polar one have been growing in recent years.
Meanwhile, the main political benefit that a state may attempt to obtain in
relation to renminbi internationalization is likely to be the improvement of its
political relationship with China, which involves its broad foreign policy toward
that country. In fact, a significant body of research on international currencies
shows that a nation’s security ties with foreign countries affect its uses of inter-
national currencies.8 One recent example is a study by Eichengreen et al. (2017)
of reserve currencies during the period prior to World War I, which finds that
a country’s having entered into a defense pact boosted its currency’s share in
its partner country’s foreign reserve holdings by an average of 30 percentage
points.9 Likewise, Wheatley (2013b: 26) contends that countries holding large
amounts of dollar reserves are paying a “security tax” to the United States: they
expect that their dollar holdings increase their chances of receiving US military
protection, while accepting the lower yields that they tend to receive on them
than they could elsewhere.10 In a similar context, Norrlof (in Norrlof et al., 2020)
also notes that if their alliance ties with or security guarantees from the United
States, or their political affinities with it weaken, states might begin to diversify
their reserve currencies away from the dollar.11
When it comes to the renminbi, there is hardly likely to be a case in which a
state adopts accommodative reactive statecraft in response to its internationaliza-
tion so as to strengthen its military ties with China. At present China does not
appear to have any strong will to provide security umbrellas to foreign states, like
the United States does, given that it holds a defense treaty with only one country,
North Korea. It is moreover doubtful whether China even has such capabilities.
It is generally assessed that China is still significantly behind the United States in
terms of military capacities, although their gap has been narrowing (Armijo et al.,
2019). In fact, as of 2018 the volume of annual US military spending was 2.6
times that of China (SIPRI, 2019).
It is likely, however, that states may use their policies related to renminbi inter-
nationalization as diplomatic tools to improve, reinforce or restore their polit-
ical relationships with China. More generally speaking, where a state wishes to
build a closer political relationship with the issuer of an international currency,
Another random document with
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 “Are you Mr. Chadsey?” my fellow china-hunter asked. “We saw
you with something that looked old-fashioned in your hand, and we
thought you might have or know of some antique furniture or old
crockery that the owners would be willing to sell.”
“Wal, I ain’t got any to sell; I only mend furnitoor. I’ve got a couple
of tall clocks in here repairin’, but they ain’t mine, so I can’t sell ’em.
N-o—I don’t know of none—except—What furnitoor do you want?”
“Oh, anything, almost, that is old, and china especially; any old
blue pie-plates or such things.”
Elam stood slowly rubbing his claw-foot and at last answered: “I
know some old blue-and-white crockery preserve-jars, or jell-pots, ye
might call ’em, which I ruther think ye could get ef ye want ’em. Ye
see, Abiel Hartshorn, he’s a widower an’ he’s a-goin’ ter marry a
school-marm up ter Collation Corners, an’ she’s got awful highty-
tighty notions, an’ he’s a-goin’ ter sell the farm, an’ she come down
ter see what things she wanted saved out of the house fur her. An’
Abiel’s fust wife she had all these old blue-an’-white pots with letters
on ’em, an’ some had long spouts, an’ she always kep’ her
preserves an’ jelly an’ sweet pickles in ’em, an’ mighty handy they
was too. An’ when this woman see ’em she was real pleased with
’em, but her brother was along with her, and he’s a clerk in a drug-
store, an’ he bust out a-larfin’, an’ says he: ‘Them letters on them
jell-pots means senna, an’ jalap, an’ calomel, an’ sweet syrup of
buckthorn, an’ lixypro, an’ lixylutis, an’ all sorts of bad-tastin’
medicines.’ An’ then she fired right up, an’ says she: ‘I won’t have
any of my preserves kep’ in them horrid-tastin’ old medicine-bottles;’
so I guess Abiel would be glad enough ter sell ’em fur most
anything.”
We suspected at once that these “jell-pots” with blue lettering of
the names of drugs were Delft apothecary jars, and that the “ones
with spouts” were the old jars, so rarely seen, that are identical in
shape with the “siroop-pots” of Dutch museums. When the Dutch
used these jars a century or more ago, they covered the open top
with tightly tied oilskin and poured the contents from the spout, which
at other times was kept carefully corked. By what strange,
roundabout journey had these Delft jars strayed to that New England
farm? We asked eagerly where we could see the despised “jell-
pots.”
“Abiel’s house is about two mile from here by the road. I tell ye
what ye can do. Ye may as well see ’em now’s ever. I’ll walk cross-
lots an’ you drive there. Go on down the road a piece an’ turn the
fust road ter the right. ’Tain’t much of a road—it’s kind of a lane. Go
on to the fust house ye come to. I’d better come, ’cause mebbe Abiel
wouldn’t let ye see ’em ef ye went alone.”
We left him and drove on and down through the narrow, grass-
grown lane. When we reached the old gray farm-house we found it
deserted and still, so we sat down on the stone doorstep and waited
for Elam Chadsey, and soon he climbed over the stone wall before
us.
“Ain’t Abiel at hum? All the better! We’ll go in ’n’ see the preserve-
jars, an’ then he won’t know any city folks want ’em an’ won’t put the
price up on ye.”
He prowled around the house, trying in vain to open first the doors
and then the windows, but to his amazement he found all carefully
locked.
“The ninny!” he said, indignantly, “he ain’t got nothin’ to steal! What
did he lock up fur? I never heard of such a thing—lockin’ up in the
daytime; it makes me mad. The dresser stan’s right in that room and
them jars is on top of it; ef ye could only see in that window ye could
look right at it, then ye’d know whether ye wanted ’em or not.”
“Isn’t there anything I could climb up on?” doubtfully I asked.
He searched in the wood-shed for a ladder, but with no success.
At last he called out: “I guess ef you two’ll help me a little we can pull
this around fur ye to stand on.”
“This” was a hen-coop or hen-house, evidently in present use as a
hen-habitation. Its sides were about four feet high, and from them
ran up a pointed roof, the highest peak of which was about five feet
and a half from the ground.
 “There,” he exclaimed, triumphantly, as he pushed it under the
window, “ef ye can git up an’ stan’ on that ye can see in. Then”—
vindictively—“we’ll leave it here fur Abiel to drag back himself, to pay
him fur bein’ such a gump as to lock his doors. I guess it’ll hold ye, ef
ye are pretty hefty.”
I may as well state the annoying fact that to be “pretty hefty” is a
great drawback in searches after “antiques.” You cannot climb up
narrow, steep ladders and through square holes into treasure-
holding attic-lofts, as may a slender antique-hunter. You must remain
patiently below and let her shout down, telling and describing what is
above. It is such a trial to an explorer to have to explore by proxy,
especially when you know you could discover more than anyone
else could. I determined that “heft” should be no obstacle to me in
this case, though the hen-house did look rather steep and high; and I
bravely started to climb. I placed one knee, then the other, and then
my feet upon the ledge at the edge of the roof, while Elam Chadsey
pushed. He weighed about one hundred pounds, and was thin,
wizened, and wrinkled to the last New England degree. He braced
his feet firmly in the ground, set his teeth, and pushed with might and
main. Alone I scaled the second height. I had barely set my feet
firmly on the peak of the roof, had shaded my eyes from the sunlight
with one hand, while I clung to the window-frame with the other, had
caught one glimpse of a row of blue-and-white apothecary jars, when
—crack!—smash! went the frail roof under my feet, and down I went
—down into the hen-house!
In spite of my distress of mind and my discomfort of body, one
impression overwhelmed all others—the anguish and consternation
of Elam Chadsey. He darted from side to side, exactly like a
distracted hen; he literally groaned aloud.
“Darn that gump of an Abiel Hartshorn! He’s the biggest fool in
Rhode Island—lockin’ up his house jest ’cause he’s goin’ away, an’
gettin’ us in this fix. Wait, miss, keep still, an’ I’ll see if I can find an
axe to chop ye out.”
Wait! keep still!—indeed I would—I couldn’t do otherwise. Off he
ran to the wood-shed, and soon came back madder than ever; he
fairly sizzled.
“Oh, the ninny! the big donkey! his axe is in the house. What do
you s’pose he locked it up fur? He’s a reg’lar wood-chuck! I’ll tell him
what I think on him. Ye ain’t hurted much, be ye, miss?”
“Oh, no,” I answered, calmly, “I’m all right as long as I keep still.
But if I try to move there are several big and very sharp splinters that
stick into me, and nails, too, I think—rusty nails, without doubt, which
will probably give me the lock-jaw. Oh, Mr. Chadsey, do you suppose
there are many eggs in this house?”
“Not many hull ones, I’ll bet. Oh, no”—very scornfully—“I s’pose
Abiel took ’em into the house to lock ’em up—the ninny. He’s the
biggest ninny I ever see. Do ye think, miss, if we could manage to tip
the hen-house over, that we could drag you out?”
“No,” I answered, vehemently, “the splinters are all pointing
downward, and if you try to pull me out they will all stick into me
worse than they do now. I have got to be chopped out of this trap,
and you must go home, or somewhere, or anywhere, and get an axe
to do it. Take our horse, and drive there, and do be careful when you
go around the corners, or the cart will upset—and do, oh, do hurry.
You must both go, our pony is so queer and tricky, and Mr. Chadsey
might have trouble with him. Now, don’t object, nothing can happen
to me in my fortress.”
So, rather unwillingly, they drove off, Elam Chadsey muttering to
himself, “that Abiel Hartshorn’s the biggest ninny in Rhode Island.”
I was alone in my hen-house. I was not at all uncomfortable—
while I kept still—though I was “cabin’d, cribb’d, confin’d.” The true
china-hunting madness filled my brain as I thought of the row of fine
blue-and-white apothecary jars which would soon be mine, and other
thoughts were crowded out. The calm and quiet of the beautiful day
also soothed and cheered me in spite of myself. The wind sighed
musically through the great ancient pine-tree that stood near the
house. Flickering rays of glowing sunlight shone down on my head
through the feathery foliage of the locust-trees that filled the door-
yard. A great field of blossoming buckwheat wafted fresh balm in
little puffs of pure perfume. Bees hummed and buzzed around me,
and a meadow-lark sung somewhere near, sung and sung as if
summer were eternal. A flood of light and perfume and melody and
warmth filled me with sensuous delight in spite of my awkward
imprisonment, and I fairly laughed aloud, and frightened the hens
and chickens that had come clucking round me in inquisitive wonder
at the removal and invasion of their home.
But my ill-timed and absurd sense of being in a summer paradise
did not last long, for I heard in a few minutes the loud clatter of
wheels coming down the lane from the opposite direction to that
which had been taken by the hurrying pair. Of course, I could not
see, for I had fallen with my face toward the house, and I did not like
to try to turn around—it inconvenienced the splinters so. The sound
came nearer and nearer, and at last I managed to move my head
enough to see a country horse and wagon with two men. Then I
leaned my face on my folded arms, and I hoped and prayed that they
might drive past. But, to my horror, to my intense mortification, they
turned and came up the driveway and underneath the shed of the
Hartshorn house.
A great dog bounded around and stared at me. I heard around the
corner the murmuring sounds of suppressed laughter and eager
questioning, of which one sentence only came distinctly to my ears:
“Queer sort of hens you keep, Hartshorn;” and then the two men
came round the house.
I hardly know what I said; I think it was this: “If you are Mr.
Hartshorn, I must beg your pardon for my sudden, impertinent, and
most unexpected intrusion on the privacy of your—hen-house” (here
we all three burst out laughing), “and I must ask if you will please get
your axe and chop up your own hen-house in order to get me out.”
Never speak to me again of Yankee inquisitiveness! Without
asking one question, Hartshorn ran into the house, brought out his
hidden axe, and while the boards were firmly held by the other man
(who, alas! was young and well-dressed, and who proved to be the
city purchaser of the farm), Abiel carefully chopped and split. I
heroically bore this undignified ordeal in silence, until at last I was
released.
“Come into the house,” said Abiel, with wonderful hospitality to so
impertinent an intruder; “ye must be a leetle tired of standin’; come in
and sit down. Ye ain’t hurt much, air ye?”
“Oh, no,” I answered, “only some deep scratches; but let me
explain to you”—and I did explain with much self-abasement how I
came to be fixed in my absurd position.
In the meantime the distracted pair had obtained the axe and were
on their way back to the scene of disaster. As soon as they were
within a full view of the house my companion china-hunter burst
forth: “Why, she is gone! Where can she be? Do you suppose she
has fainted and sunk into the hen-house? No, I can see, it is empty;
she has got out of it somehow.” Then she jumped out of the cart, ran
up the path and through the open door, and found me sitting calmly
talking with the well-dressed young man.
From the kitchen we soon heard sounds of violent and vituperative
altercation.
“Abiel Hartshorn, yer the biggest fool I ever see. What did ye lock
yer house up in the daytime fur?”
“To keep out jest such pryin’ haddocks as you and them be.”
“Ye ain’t got nothin’ in it, anyway.”
“Then what did you and her want to peek in fur?”
“Such a rotten old hen-house I never see.”
“’Tain’t made as a platform fur to hold a woman of her size.”
“She don’t weigh much.”
“She do, too. Ye ain’t no judge of heft, Elam; ye don’t weigh
enough yerself.”
“What did yer lock up yer axe fur?”
“Ef I’d a-knowed yer’d a-wanted it so bad, I’d a-perlitely left it out
fur ye.”
 “Wal, I never heard of sech a thing as lockin’ up a house in the
daytime, and yer axe, too—how could ye be such a fool? Say, Abiel,
she looked funny though, didn’t she?”
All’s well that ends well. Abiel, having sold the farm, was glad to
sell the roofless hen-house for two dollars, and he eagerly gave me
the drug-pots. The former antique was never claimed, and the blue-
and-white jars proved for many months too painful and too hateful a
reminder to have in sight. Now they stand on table and shelf—pretty
posy-holders, but severe and unceasing monitors. Their clear blue
letters—“Succ: E, Spin: C,” and “U: Althæ,” and “C: Rosar: R,” etc.—
speak not to me of drugs and syrups, of lohocks and electuaries;
they are abbreviations of various Biblical proverbs such as “Every
fool will be meddling,” “He taketh the wise in their own craftiness,”
“Boast not thyself of to-morrow, for thou knowest not what a day may
bring forth,” “Let him that thinketh he standeth take heed lest he fall,”
etc. And the little ill-drawn blue cherubs that further decorate the
drug-pots seem always to wink and to smirk maliciously at me, and
to hold their fat sides as though they were thinking of the first time
they peeped at me and jeered at me out of the window of the gray
old farm-house as I stood entrapped in my meddlesome folly in the
sunlight under the beautiful locust-trees in old Narragansett.
I cannot tell a romantic story of a further acquaintance with the
good-looking young man; I never saw him again, and I am sure I
never want to. Still, I know, ah, too well I know, that he often thinks of
me. On that susceptible masculine heart I made an impression at
first sight. When he welcomes visitors to his country-home I know he
often speaks of his first glimpse of the house—and of me. ’Tis
pleasant to feel my memory will ever bring to one face a cheerful
smile, and furnish a never-failing “good story”—nay, to three, for I
know that Elam Chadsey and Abiel Hartshorn both keep my memory
green; that to them my mishap was “argument for a week, laughter
for a month, and a good jest forever.”
 THE DANCING TURKEY
In the States Papers office in London is a “propper ballad” entitled
a “Sommons to New England,” which was written about 1680. It
alluringly recites natural conditions in the colonies. One verse runs
thus:

“There flights of foules doe cloud the light,

Of turkies three score pound in weight
As bigg as ostridges.”

All the early travellers in America confirm the vast weight of these
wild turkeys—Josselyn said sixty pounds. The turkey has not grown
larger by domestication, the wild birds are still finer and more
beautiful than the tame ones. All foreign epicures agree that
American turkeys are the best in the world. In America we make fine
distinctions, even in American turkeys; tastes differ with localities. In
some northern States no turkey is perfect unless stuffed with
chestnuts—that is, as food. In Louisiana he is gorged with pecan-
nuts. In South Carolina raw rice is your only prime turkey-food. In
Virginia wild persimmons give the turkey a tang that gilds refined
gold. The President of the United States, whoever he may be, feasts
every Thanksgiving Day on a Narragansett turkey fattened on
Narragansett grasshoppers—and I approve the President’s taste.
These Presidential turkeys, though great and fat, are not “as bigg
as ostridges;” but a Narragansett turkey with whom I was acquainted
—as Rosa Bonheur would say—fairly rivalled his ancestors of
colonial days.
His name was Launcelot Gobbo; he was born, or rather hatched,
on a Narragansett farm. He was the joint property of Bill and Ralph
Prime, two farmer’s sons, fourteen and fifteen years of age, who,
according to the good old fashion in the Prime family, were given
each year some portion of the farm stock—a cosset lamb, a brood of
chickens, a pig, a cote of pigeons—to rear and sell, or keep as their
very own. This year their share of the farm-products was Launcelot
Gobbo and his mate. His name was given him by the village school-
teacher, a young college student who chanced to come frequently to
call on the boy’s sister, Mary Prime. Gobbo was chosen as their
handsel because he was such a mammoth turkey-chick, a nine-
days’-old wonder; and by tender cherishing he had fulfilled the great
promise of his youth.
This great size had been aided by careful feeding, on a composite
diet, of Narragansett fashion, extended by Oriental suggestion. His
first food was such as all well-reared Narragansett turkeys have, milk
curdled with rennet, by which the gasps and stomach-ache so fatal
to turkey infancy were avoided. Then came the natural food-supply
of grasshoppers and Rhode Island whole corn. The Prime boys had
few books to read; among them were several dry and colorless
memoirs of sainted missionaries to the East. There was one
nutritious kernel, however, in one of these rustling husks of books; it
was an account of the preparation of locusts as food, the roasting,
frying, and drying them for grinding them into meal. Bill Prime was an
inventive genius, a true Yankee, ever ready to take a hint; moreover,
he was animated by sincere affection for his pet, and pride in his
size; and as he read the meagre missionary accounts he conceived
the notion of supplying Gobbo with his dearly loved grasshoppers
after autumnal winds had chilled and cleared the fields of vegetable
and insect life.
It was not as easy a task to catch and dry these American
grasshoppers as Oriental locusts, but love laughs at limitations; just
as Gobbo laughed when his daily dole of grasshoppers was dealt out
to him on chill October and November mornings, with the Tallman
sweetings that formed his dessert. “Laugh and grow fat” is the old
saying; and as Gobbo laughed he also grew fat, and he waxed taller
and taller. Ralph thought Gobbo weighed thirty pounds; Bill set the
weight at least five pounds higher. As the turkey was full and rich of
feather he looked to me twice as large as any other I had ever seen;
really big enough to reach the seventeenth-century standard of
“three score pound in weight.”
But Gobbo had other claims to consideration besides his size or
his distinguished name; he was an accomplished turkey—a trick-
performer. Like Shakespeare’s famous Gobbo for whom he was
named, he “used his heels at his master’s commands.” When Bill
struck the ground near him with a stick and called out “Dance,
Gobbo, dance for the ladies,” and set up a shrill fife-like whistle,
Gobbo spread his great fan-like tail, and nodded and bowed his
head, and circled and hopped around in exact time with the rapping
of the stick, in the most pompous, ridiculous, mirth-provoking
caricature of a dance that ever was footed or clawed. He posed
before the whole town as a show-bird. Stolid Narragansett farmers
and fishermen for miles around came to see him, and roared aloud
at his dancing, which he had to exhibit every day in the week. Even
on Sunday, at the nooning, Bill proudly but secretly led the
neighbors’ boys home to the farm and behind the barn; though the
deacon sternly frowned on a Sunday dance, even by a turkey who
had no soul to be saved.
It was the second week of November; Gobbo was still growing and
still dancing, when one day a gayly painted vehicle with a smart
horse came dashing into town. The wagon had an enclosed box
behind the chaise front. It might be taken for a peddler’s cart or a
patent-medicine coach, but it was neither; it was the collecting-van of
a Boston “antique-man.” Persuasive, smiling, flattering, peering into
every kitchen, cupboard, and dresser, in every parlor closet, in every
bedroom and gabled attic, he gathered in his lucrative autumnal
harvest of brass andirons and candlesticks, of old blue dishes and
copper lustre pitchers, of harp-back chairs and spinning-wheels. He
débonnairly purchased two pewter porringers, a sampler, and an old
mirror of Mrs. Prime, while he effusively praised the farm and the
cattle. And as he partook of the apples and cider generously set
before him, he shouted with laughter at Gobbo, who proudly danced
for him again and again. As the early twilight began to lower, the
“antique-man” called out a cheerful good-night and drove away.
Gobbo also stalked off—and forever—from the Prime door-yard, for
in the morning he had vanished from the farm as completely as if he
had evaporated.
How the boys stormed and mourned! how fiercely they descended
on the “colored” Johnsons, more than suspected in the past of
chicken-stealing! how they hunted the woods and meadows! how
they fretted and fumed!—but to no avail. To check their worry and
anger, their mother sent them off to Boston to spend Thanksgiving
week with their married sister.
With the sea-loving curiosity of all boys, they haunted the wharves
and lower portions of the city, and on the day before Thanksgiving,
as they wandered up from the docks through a crowded and noisy
street, they joined a little group gathered around the show-window of
a “dime musee,” for in the window stood as a lure, a promise of
treasures and wonders within, an enormous turkey, penned in a wire
coop, drooping of feather, and listlessly feeding.
“He isn’t nearly as big as Gobbo,” said Bill, contemptuously. “Not
much,” answered Ralph; but even as they spoke there gathered in
their questioning brains, in their eager eyes, a conviction which burst
forth from their lips: “It is Gobbo!”
Now they were Yankee boys, slow but shrewd, and they knew
every feather of the wings, every fold of the comb and wattle of their
pet; but each paid his dime and entered the museum to be sure.
Past the voluble showman, the wax figures, the stuffed animals, they
silently strolled to the window. No one else stood near within doors.
“Dance, Gobbo, dance for the ladies!” cried Bill, excitedly, striking the
floor with his cane, and his heart beat high. Oh! how the crowd
outside on the street laughed as Gobbo spread his tail and danced
“most high and disposedly,” as the French ambassador said of
Queen Elizabeth in the gavotte.
A great printed card hung over Gobbo’s pen; he was to be raffled
that very night. Made suspicious by fraud, the boys scarcely dared
leave the hall even for food, but with the instinctive good sense of
many of country birth, Bill interviewed a friendly policeman on the
beat, and another policeman appeared at the raffling at eight o’clock
and sat near the Prime boys on the front row of seats in the hall.
 At the appointed hour a noisy but not disorderly crowd had
gathered. The master of ceremonies removed the wire netting from
around Gobbo, who was still feeding and still fattening. The
showman entreated silence, and in a reasonable stillness began:
“Gentlemen, this magnificent turkey, the biggest ever known in the
civilized world, the feathered monarch of the ornithological world, will
—” when a shrill whistle pierced the air, and “Dance, Gobbo, dance
for the ladies!” was roared out. The turkey reared his long neck and
head like a snake, and with a piercing gobble literally flew from the
platform to his friend Bill, with a force that almost stunned the boy.
The showman advanced: “What does this mean?” he shouted. “Don’t
you touch him,” screamed Bill, and “Don’t you touch him,” confirmed
with emphasis the policeman, while Ralph explained to the
inquisitive and sympathizing ’longshoremen and sailors who
crowded around him, how the turkey had been lost and found; not
without some bitter aspersions on the character of the antique-man.
An adjourned meeting was held at the police-station the following
morning, when the Prime boys testified and Gobbo danced, and a
gay session it was in those dingy rooms; and the showman with a
sham good-humor resigned his claims to what had proved to him a
very lucrative drawing-card.
There ought to be a romantic ending to this tale of a lost love; but
every turkey has his day, and this was Gobbo’s. He was too big to
keep in a city yard, and too big to take home in the cars; thus did his
greatness, as did Cardinal Wolsey’s, prove his destruction. Even his
accomplishments were a snare; for when it was known he could
dance, his talent could not be hidden under a bushel in obscure
country-life. He had ever been destined for a city market, and soon
again he graced a window, this time of a great city poulterer; and on
the eve of Thanksgiving he was again raffled—the second time, alas!
with hanging wings, and plucked sides, and drooping head.
 CUDDYMONK’S GHOST
Black Cuddymonk and his wife Rosann were holding an animated
discussion as they sat before the fire in their cheerful kitchen in old
Narragansett. That is, Cuddymonk was talking loudly and effusively,
while Rosann said little, but said it firmly; and in the end succeeded
in having her own way, as such stubborn, talk-less persons usually
do, whether they be black or white. Cuddy had had an offer of
employment for a month, and he was unwilling to accept the position
and do the work; but Rosann calmly overruled him and he had to
yield. It was not that the work was hard, or that the pay was poor, but
simply that Cuddy was afraid, he was too superstitious to dare to
face the terrors that the performance of his duties might bring forth.
And yet it seemed simple enough! Old Dr. Greene had the
rheumatism and could not hold the reins to drive, and he wanted to
hire Cuddy to drive in his chaise with him when he went on his daily
round of visits, and to care for the horse when he returned home.
Cuddy would have loved to feed and rub down the horse, and drive
through the sunny lanes and green woods, and sit in the sun while
the Doctor visited and dosed and bled within doors. It would be like
making a round of visits himself, for he was then “Black Gov’nor,”
and at every house in village or on farm he would find some friend or
constituent to chat and gossip with. But alas! all the Doctor’s visits
were not made in the daytime, and Cuddy shrank from the thought of
driving all over Narragansett in the night. He thus complained to
Rosann: “I wouldn’t care if it warn’t for dem darminted graveyards.
Dere’s a graveyard on ebery farm all ober dis country. I nebber see
sech fools es folks is in Narragansett. Dey warnts ter hab ghosts
ebberywhere. Why don’t dey keep ’em all in de ole church-yard ober
ter Fender Zeke’s corner, den yer can go de road dat leads round de
udder way, an’ not meet ’em. Down Boston way dey buries folks in
church-yards an’ keeps der ghosts where dey belongs.”
 Cuddymonk had travelled, and knew how things should be; he had
ridden to Boston thirty years previously with Judge Potter; and the
strange sights he had seen, and the new ways he had learned at
that metropolis, had been his chief stock-in-trade ever since, and,
indeed, had formed one of his great qualifications for election as
Black Governor.
Rosann answered him calmly and coldly: “I’s sick er ghosts,
Cuddymonk. I’se been mar’d forty year, and you’s a-talkin’ about
ghosts all de whole during time an’ a-speerin’ for ghosts all dem
years, an’ yer ain’t nebber seed one yit. You’s jess got ter go ter de
Doctor’s termorrer an’ dribe for him.”
“Rosann, when yer sees me brung home a ragin’ luniac wid misery
ob de head, yer’ll wish yer hadn’ drove yer ole man erway from yer
bed ’n’ b’ord ter go foolin’ all ober de country in de night-time, seein’
ghosts and sperits an’ witches. P’raps I sha’n’t nebber come home
alibe, anyway.”
“You’s got ter go, Cuddy, an’ dar ain’t no use er talkin’ ’bout it. I
guess de ole Doctor kin charm off any ghost you’ll eber see. ’Sides,
he won’t be out much nights when he got de rheumatiz ser bad.
’Tain’t ebry day yer kin git yer keep an’ ten dollars a month, an’ yer
ought ter dribe fer him anyway, ter ’comerdate him, when he sabed
yer troo de bronchiters.”
So Cuddy went to the Doctor, and for a week all was well with him.
He drove to all points from Wickford to Biscuit Town, and received
such greeting and honor from all of his race as was due a governor.
But an end came to all this content, for late on a misty, miserable
September afternoon young Joe Champlin came riding up to the
doctor’s door in great speed, and in a few moments the Doctor
shouted out to Cuddy to harness up Peggy. Cuddy was wretched.
He knew well where the Champlin farm lay—far up on Boston Neck
—and he thought with keen terror of the lonely road, of the many
little enclosed graveyards that lay between him and the Champlin
homestead. Fear made him bold, and he managed to stammer out to
the Doctor the request that he would have Joe Champlin hitch his
saddle-horse behind the chaise and drive the Doctor to the farm,
where horse and chaise and doctor could remain all night; then he
(Cuddy) would walk up early in the morning to drive back. The
Doctor scoffed at the ridiculous proposition, and barely gave Cuddy
time ere they started to put on his coat and waistcoat wrong side out
—a sure safeguard against ghosts. As they drove up Boston Neck in
the misty twilight Cuddy suffered keen thrills of terror whenever he
got down from the chaise to let down bars or open gates; for the only
roads at that time in that region of Narragansett were drift-ways
through the fields—well-travelled, to be sure—but still kept closed by
gates. Cuddy clambered in and out of the chaise, and opened and
closed the gates with an agility that amazed the Doctor, who had
previously had frequent occasions in the daytime to revile him for his
laziness in like duties. He also glanced with apprehension and dread
at the family burying-grounds they passed, counting to himself the
whole dreary number that would have to be repassed on the way
home.
These sad little resting-places are dotted all over Narragansett. In
olden times each family was buried in some corner on the family-
farm. Sometimes the burying-place was enclosed in a high stone
wall; often they were overgrown with great pine or hemlock trees, or
half-shaded with airy locust-trees. Ugly little gravestones were
clustered in these family resting-places—slate head-stones carved
with winged cherub heads and quaint old names, and lists of the
virtues of the lost ones; and all the simple but tender stone-script of
the country stone-cutter’s lore—hackneyed but loving verses—
repeated on stone after stone. Beautifully ideal is the thought and
reality of these old Narragansett planters and their wives and
children resting in the ground they loved so dearly, and so faithfully
worked for. But there was nothing beautiful in the thought to Cuddy;
he groaned as he passed them, and thought of his midnight return;
and he tried to learn from the Doctor how long he would probably be
detained at the Champlin farm. But Dr. Greene, accustomed to ride
alone for hours through the country, was taciturn and gruff, and kept
Cuddy in ignorance of both the name and ailment of the patient.
When they reached the Champlin farm Cuddy ventured to say,
with a cheerful assumption of interest: “’S’pose you’ll stay here all
night, Doctor, it’s so cole an’ damp an’ so bad fer yer rheumatiz. I’ll
sleep in de hay in de barn an’ won’t bodder nobody.”
“No, indeed,” answered the Doctor, sharply, “we’ll start back in half
an hour.” Cuddymonk gloomily hitched and blanketed the horse, and
walked into the great kitchen, where, nodding and dozing, sat old
Ruth Champlin, the negro cook. When Ruth saw his reversed
clothing, she did not dream of smiling at his absurd appearance, but
at once sympathized with him in his gloomy forebodings; and while
she filled him with metheglin—a fermented mead made of water,
honey, and locust-beans—she also filled him with fresh stories of
witches and ghosts until the time came to start on the homeward
drive, when the poor “Black Gov’nor’s” nerves were completely
unstrung.
I will not give a list of the terrors that assailed Cuddy from the first
moment of his ride home. A rustling leaf, a cracking branch, a
sighing wind, were magnified into groans and wails. Every stone,
every bush, seemed an uncanny form; every cluster of blackberry
bushes, every hay-rick, a looming monster. And when Dr. Greene
decided to return by Pender Zeke’s corner, and thus pass the old
church foundation of the Narragansett Church and its cluster of
deserted gravestones, Cuddy’s terror found words.
“Don’ do it, Doctor; don’ go by dat darminted ole church
foundashum. It’s a dreffle lonely road, an’ ebberybody knows dere’s
ghosts in dat ole church-yard ebbery night. Ole Mum Amey seed one
a-dancin’ on ole Brenton’s table-stone. Fer de lub ob praise, Doctor,
don’ less go dere to-night. Ole Tuggie Bannocks an’ all dem dashted
ole witches gadders in de ole noon-house dat stan’s in de church-
yard an’ brews dere witch-broth; an’ ef anyone sees ’em a-brewin’
dey can nebber eat nothin’ else, an’ pines away wid misery ob de
stummick an’ dies.”
The Doctor only answered, gruffly, “Go by the corners, Cuddy; I’ll
drive off the ghost.”
As they approached the haunted church-yard Cuddy was fairly
speechless with apprehension. His teeth chattered, and he held the
whip in one trembling hand to ward off any ghostly or witchly attack.
Words would fail in attempting to express the horror, the agony,
which seized him, which overwhelmed him when he saw as he
passed the old noon-house an unearthly, an appalling, object, which
he could not bear to look at, nor could he force his staring eyes to
look away from. The Doctor saw it, too—a tall slender column, about
seven feet in height, of faintly shimmering light vaguely outlining a
robed figure, not of a human being, but plainly of a ghost. It
appeared to be about a hundred feet from the road, though it could
be clearly seen through the mist, and it seemed palpitating with a
faint, uncanny radiance. “Stop, Cuddy,” eagerly roared the Doctor, “I
want to see what that is!” And as Cuddy showed no sign of stopping
the horse’s progress, he seized the reins from the negro’s shaking
hands. Cuddy, frightened out of all sense of respect or deference,
shouted out, “G’lang, git up,” and attempted to whip the steed.
“Cuddy, you black imp! if you dare to do that again, I’ll whip you
within an inch of your life. I’m going to get out and see what that is. It
is a very interesting physical phenomenon.”
“Oh, Doctor dear, you’s bewitched a’ready. Dere ain’t no physic
about dat, it’s a moonack. Fer de lub of God, don’t go near it—you’ll
nebber walk out alibe”—and with that the unhappy black man fairly
burst into tears and threw his restraining arms around the Doctor’s
neck.
The unheeding Doctor jumped from the side of the chaise with a
force that nearly dragged Cuddymonk with him. The weeping negro’s
affection and interest would carry him no farther, and as the Doctor
walked sturdily across the church-green, Cuddy, moaning and
groaning in despair, gathered up the reins, ready, at any motion or
sound of the ghost, to start the horse down the road and wholly
desert the Doctor.
The brave ghost-investigator walked up the four narrow stone
steps that once led to the church door—but now, alas! lead sadly
nowhere—then turned into the graveyard. As he stumbled eagerly
along through the high grass and tangled blackberry-bushes, and as
he passed under the shading branches of a wild-cherry tree, a most
terrifying catastrophe took place—he plunged and slid into an open
grave containing about a foot of water. Cuddy heard the splash, and
it indicated to him the Doctor’s utter annihilation. He gathered the
reins up with a groan of despair and prepared to drive off with speed,
lest the moonack chase and overwhelm him also, when he heard the
Doctor’s voice. The instinct of obedience was strong in him—for he
had been born a slave—and he delayed a moment to listen. “Come
here, Cuddy,” shouted the Doctor, “I’ve fallen into the grave they’ve
dug for old Tom Hazard.” Cuddy groaned, but did not move, either to
drive, or to fly to the Doctor’s rescue. “Come here, I say, and help me
out; I shall die of the rheumatism if I stay here.” Another groan, but
still no motion to render assistance. “Cuddy, if you don’t come, I’ll
conjure you with that big skeleton in my closet.” Still no answer, and
at last, the Doctor, by dint of struggling and breaking away the earth,
managed to drag himself out of the shallow grave. Undaunted by a
mishap that would have both mentally unnerved and physically
exhausted anyone but a country doctor, unchilled in spirit though
shivering in body, the determined investigator walked up to the
ghost.
He took one glance and at once turned, and, avoiding the open
grave, ran down the steps and across the green. “Come here,
Cuddy; if I die of rheumatism I’ll take you up and show you that
ghost. I’ll conjure you with every charm in the witch-book if you don’t
come.” Cuddy was weak with terror, and the Doctor seized him by
the collar, pulled him out of the chaise and up the steps. With
chattering teeth and closed eyes he stumbled along by the Doctor’s
side, clutching his leader’s arm and muttering words of Voodoo
charms. When they reached the faintly shining ghost, the Doctor
shouted, “Open your eyes, Cuddy,” and his power fairly forced
Cuddy to comply. The Doctor raised his whip and brought it down on
the shining ghost; a great swarm of fire-flies rose in the air, leaving
disclosed a juniper-tree, which had chanced to grow somewhat in
the form of a human figure. This strange phenomenon I cannot
explain, but it is not the only time that a juniper-tree on a misty night
in fall has attracted a swarm of fire-flies to light upon it.
Cuddy nearly fainted in revulsion of feeling. Both returned to the
road and clambered into the chaise. The Doctor was now thoroughly
chilled. He took from the medicine-chest that he always carried (“the
Doctor’s bag o’ tools,” Cuddy called it) a flask that may have
contained medicine, but which smelled more like “kill-devil,” and
bade Cuddy drive with speed to Zeke Gardiner’s; for when the heat
of the chase was over, the valiant old Doctor began to feel the
twinges of an enemy that he dreaded more than any ghost—his
rheumatism—and he dare not ride home dripping with icy grave-
water, even if he were full of Jamaica rum.
No lights were seen at Zeke’s, but a vigorous knocking at the door
roused the entire amazed and sympathetic family; and while one
blew up a roaring fire in the chimney, another heated a warming-pan,
another took off the Doctor’s muddy clothes, and Mistress Gardiner
concocted a terrible mixture—a compound tea of boneset,
snakeroot, and chamomile, which, in spite of the Doctor’s fierce
remonstrances and entreaties for a mug of flip instead, she poured
down his throat, thus cancelling in one fell dose many a debt of
nauseous bolus, pill, or draught that she owed to him.
The perspiring Doctor, as he was being smothered in the great
feather-bed, and singed with the warming-pan, and filled to the teeth
with scalding herb-tea, gave his parting order to Cuddy—to drive
home and tell Mrs. Greene that he had been detained at the
Gardiners’ all night “on account of an overdose of spirits,” and then
to come for him in the morning. Cuddy listened respectfully and
answered obediently, went quietly around behind the Gardiners’
house, calmly placed the horse in the Gardiners’ stable and the
chaise in the Gardiners’ barn, slept the sleep of the brave, the
obedient, the unhaunted, in the hay in the upper hay-mow, and
appeared, as ordered, with horse and chaise at the front door the
following morning.
 Books by Alice Morse Earle

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