The Full Convertibility of Renminbi: Sequencing and Influence
AbstractThis paper examines the issue of achieving full convertibility for the Chinese currency, Renminbi (RMB), and its impact on the economies of both mainland China and Hong Kong. It focuses on the sequencing of Renminbi¡¦s full convertibility, clarifying the different concepts of currency convertibility, i.e. current account convertibility, capital/financial account convertibility, and full convertibility. It also discusses the differences between removing restrictions on international transactions and removing restrictions on the exchange of foreign currencies. There still exist various extremely strict restrictions on capital/financial account convertibility in China. There is still a long way to go before these restrictions can be removed completely. China¡¦s accession to the World Trade Organization (WTO) will surely drive the course of Renminbi¡¦s full convertibility. However, the Renminbi may not become a fully convertible currency within the five years after China¡¦s accession to the WTO. This paper comes to the conclusion that there does not exist a uniform or fixed sequence in adopting the full convertibility of a currency due to the differences between countries. At the same time, based on the common practices and basic sequence taken by most countries in the world, drawing on the experience and lessons from other countries¡¦ practice and given the fact that China is a large developing country, we also conclude that a progressive and prudent sequential process is needed for the full convertibility of Renminbi.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 092002.
Length: 45 pages
Date of creation: Apr 2002
Date of revision:
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convertibility of Renminbi; WTO; China; Hong Kong;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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