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Three junctures for the renminbi's internationalization
Author(s)
Date Issued
2011
Publisher
The International Academic Forum 2011
Citation
Yuen, W. K. (2011). Three junctures for the renminbi's internationalization. In The International Academic Forum (IAFOR) (Ed.). The Asian business and management conference conference proceedings 2011, The Asian Business and Management Conference 2011, Osaka, Japan (pp. 88-103). The International Academic Forum 2011.
Type
Conference Paper
Abstract
As China’s economy continues to grow in all respects, it is agreed worldwide that the
Renminbi (RMB) should play a more important role. Yet how rapid the process of the RMB’s
internationalization will be or when China will decide to open her capital account depends on
the policy decisions of the Chinese authorities. Allowing the RMB to be internationalized or
become fully convertible means that the Chinese authorities would have to hand over, at least
partially, their control over the RMB or even over monetary policy, to the market. “Prudence”
has always been the policy style of the Chinese authorities, and to reduce the fluctuation of
the RMB as it goes international, it is necessary to ensure that the size of the RMB market
pool, in terms of both demand and supply, is large enough to absorb any unexpected shocks.
To satisfy this condition, this paper foresees that the process of internationalization of the
RMB needs to pass through three stages! (junctures). The first would be to establish close
trading relationships or free trade agreements, and arrangements for cross-border settlement
of transactions in the RMB with emerging economies, especially the other countries in the
BRICs group. The second stage would be to diversify the economic growth model from an
export-capital formation-led growth to an export-consumption-technology led growth model.
The final stage would be the development of a financial market, including both onshore and
offshore transactions, that is deep and wide enough to protect against any external shocks.
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