The role of Renminbi internationalization in China’s petroleum security: a causal analysis amidst global uncertainties

ABSTRACT

China’s import of petroleum resources increases in recent years despite structural reforms to the Chinese economy. Primary energy demand increased significantly amidst global uncertainties, and this is a premise for energy security concerns for the country. In this paper, we rely on monthly data spanning from January 2011 to December 2022 and incorporate the role of global economic uncertainty to examine the causal relationship between Renminbi internationalization (RMBI) and petroleum security in China. Based on the recent VAR-based time-varying Granger causality procedure, we found a significant bi-directional causality between RMBI and petroleum security. The findings imply that increasing acceptance of the Renminbi (RMB) in trade settlements and petroleum invoicing will promote China’s drive to achieve a sustainable and reliable supply of petroleum. However, we proffer some policy suggestions based on the empirical findings.

KEYWORDS:

• Renminbi internationalization
• petroleum security
• economic policy uncertainty
• VAR-based time-varying Granger causality test

Acknowledgments

The authors would like to thank the anonymous referees for taking the necessary time and effort to review the manuscript. We sincerely appreciate all valuable observations and suggestions, which helped us to improve the quality of the manuscript. We thank Shanbing Lu and Yang Rong for stimulating discussions and helpful observations. All remaining errors are our own.

Disclosure statement

Author(s) of this research has support from the Scientific Research Program of Shaanxi Education Department (Grant No. 19JZ051). The terms of this support was reviewed and approved by the Xi’an Shiyou University in China in accordance with its policy objectivity in research.

Additional information

Funding

The work was supported by the Social Science Research Project of the Shaanxi Province [2021D051].

Notes on contributors

Ding Chen

Ding Chen is a researcher at the School of Economics and Management Xi’an Shiyou University China.

Umar Muhammad Gummi

Umar Muhammad Gummi is a Faculty Member at the Sokoto State University and a Postgraduate Researcher at the Center for Energy, Petroleum and Mineral Law and Policy, University of Dundee, UK.