The rapid internationalization of the RMB since 2009 raises many interesting questions, including: Why has this change been so fast? What is the rationality behind this new process? What economic consequences will it produce? What kinds of policies should China adopt to make the process smooth and sustainable? In this paper, we first describe the main developments of RMB internationalization and discuss the rationality of the process, by comparing its benefits and costs. Then, based on the historical experience of the main international currencies, we use a Size-Liquidity-Credibility analytical framework for understanding the determinants of being an international currency. Using this framework, we then provide some policy suggestions for making RMB internationalization a sustainable process.

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