Capital controls reinforce the shallowness of China’s financial markets which hinders the RMB internationalization process. More fundamentally, the lack of independence of regulatory bodies and the state’s sway over financial market participants draws a line in the sand for RMB internationalization.

China has taken full advantage of regional willingness for RMB trade settlement and global hunger for Chinese assets to further RMB internationalization. However, much of the deregulation that has raised the RMB’s global position has been made under duress from international standards.