Revisiting the Internationalization of the Yuan
Abstractï»¿As the worldâ€™s second largest economy, largest trading nation, and the largest foreign holder of United States (US) government bonds, the Peopleâ€™s Republic of China (PRC) needs a currency with international status that can match its economic status in the global economy. However, sequencing is important. Before the internationalization of the yuan can make meaningful progress, necessary conditions, such as the existence of deep and liquid financial markets, a flexible exchange rate and interest rates responsive to market conditions must be created. The process of yuan internationalization essentially is a process of capital account liberalization. Due to the unprecedented and complex global financial crisis and the PRCâ€™s huge imbalances, capital account liberalization has to be pursued in a cautious way. As a result, the internationalization of the yuan is bound to be a long-drawn process. The PRCâ€™s road map for the internationalization of the yuan is flawed with many missing links and wishful thinking. Yuan internationalization guided by the current road map may be proven counterproductive.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 23311.
Date of creation: Jul 2012
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Yuan; internationalization; China; PRC; currency; international status; financial markets; exchange rate; capital account;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
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