We analyze the phenomenon of “currency flowback”—the return of offshore renminbi (RMB) to China’s financial system—as a channel linking the currency’s internationalization with domestic stability. A DSGE model embedding flowback mechanisms and foreign bond portfolios simulates bond market liberalization, external investment, and macro-financial shocks, asking whether balanced flowback can widen the RMB’s global role while safeguarding the home economy. Results show that gradual opening of the onshore Treasury market raises demand for RMB assets, deepens liquidity, and narrows exchange rate swings, strengthening the currency’s attractiveness as a settlement unit. Moderate foreign holdings dampen the transmission of interest rate or crisis shocks, bolstering capital account resilience; however, excessive concentrations heighten exposure to abrupt reversals. Thus, flowback is stabilizing only up to a threshold. Policy recommendations are threefold: expand bond market access while capping single-class foreign concentrations; establish a monitoring framework for flowback volumes and maturity profiles; and integrate flowback metrics into People’s Bank of China policy rules, especially during stress episodes. Managed wisely, flowback can advance efficient capital formation, robust financial infrastructure, and balanced integration into global markets.