China needs to grow its US dollar reserves to boost the yuan's status as a global reserve currency and gain credibility, new study says

According to a new paper from the Center for Economic Policy and Research, Beijing would have to promise a stable dollar-conversion rate in order to boost the credibility and influence of the renminbi.

According to the authors, it is possible for China to drive more adoption of the renminbi by accepting dollar payments for exports.

The authors wrote that despite China's limited capital account openness, the share of renminbi in reserves can increase if Chinese trade and renminbi invoicing continue to increase. The renminbi is a foreign currency.

According to the paper, nations that have a trade deficit with China can still build their yuan reserves if Beijing pays for imports in Chinese currency.

This would allow other countries to help increase the volume of yuan in use.

China will have to work hard to get more credibility with the world. The authors wrote that China will have to increase its dollar holdings if it needs to intervene in the currency market.

The dollar's status has caused other countries to be subject to severe political and financial influence by the US. It seems counterintuitive for China to increase their dependence on the dollar.

The only way for China to make the renminbi a significant reserve currency is through its peculiar relationship with the world's two largest economies. The RMB can go through an internationalization process.

The International Monetary Fund said in March that the Chinese currency had gained on the US dollar as a reserve currency. The International Monetary Fund stated that central banks around the world are looking to diversify their holdings due to China's push for greater adoption of the renminbi.