How to grow an invoicing currency: Micro evidence from Argentina

We study the internationalization of the Chinese renminbi (RMB) leveraging a unique policy experiment. In 2023, amid a dollar shortage, Argentina expanded a currency swap line with China. The share of imports from China invoiced in RMB surged rapidly, displacing the dollar, which had previously accounted for virtually all invoicing. Following the presidential election of late 2023, as the dollar shortage eased, invoicing in RMB declined. We explore the mechanisms behind this pattern, using firm-level data on imports, bank-firm loan relationships, and bank balance sheets. We find that banks played a key role. Firms with pre-existing relationships to banks with limited US dollar loans were more likely to switch to RMB. In addition, firms borrowing from a Chinese state-owned bank were more likely to use RMB. We also document firm-level spillovers, with RMB use for imports from China increasing RMB use for imports from other countries. Finally, firms switching to RMB saw increased total imports.