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Externally Imposed Financial Repression, Conflicted Internationalisation of the Renminbi and External Balancing via Wage Adjustment

In: Central Banking and Financial Stability in East Asia

Author

Listed:
  • Gunther Schnabl

    (Leipzig University)

Abstract

China has made several important steps to liberalise its domestic financial markets and to open up its capital markets internationally in order to promote the renminbi as an international currency. To make the renminbi a convertible, freely floating international currency is a pre-requisite for the renminbi to challenge the dollar as an international currency. The chapter shows, however, that the very benign liquidity conditions in the US, combined with very large foreign currency denominated assets, constitute an insurmountable impediment for the floating and the internationalisation of the renminbi. With exchange-rate stability being seen as an important determinant of macroeconomic stability and growth in China (and East Asia), domestic-wage increases are proposed in order to reduce the appreciation pressure on the Chinese currency.

Suggested Citation

  • Gunther Schnabl, 2015. "Externally Imposed Financial Repression, Conflicted Internationalisation of the Renminbi and External Balancing via Wage Adjustment," Financial and Monetary Policy Studies, in: Frank Rövekamp & Moritz Bälz & Hanns Günther Hilpert (ed.), Central Banking and Financial Stability in East Asia, edition 127, pages 125-139, Springer.
  • Handle: RePEc:spr:fimchp:978-3-319-17380-1_7
    DOI: 10.1007/978-3-319-17380-1_7
    as

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