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Renminbi internationalisation and China’s financial development

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  • Robert N. McCauley

Abstract

There is a widespread view that China’s currency can be used in international markets only after the liberalisation of China’s domestic financial markets and the opening of its capital account. Yet evidently the renminbi’s internationalisation is preceding these so-called preconditions. This article assesses the tensions inherent in renminbi internationalisation starting at a transitional period in China’s financial development. For now, effective capital controls allow the Chinese authorities to retain regulated deposit and lending rates, quantitative credit guidance and bond market rationing. Relaxation of the capital controls would put these policies at risk. Reserve requirements can be extended to bank inflows from the offshore market but only at a price.

Suggested Citation

  • Robert N. McCauley, 2013. "Renminbi internationalisation and China’s financial development," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(2), pages 101-115, May.
  • Handle: RePEc:taf:jocebs:v:11:y:2013:i:2:p:101-115
    DOI: 10.1080/14765284.2013.789681
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    File URL: http://hdl.handle.net/10.1080/14765284.2013.789681
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    References listed on IDEAS

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    1. Dong He & Robert N. McCauley, 2010. "Offshore Markets for the Domestic Currency: Monetary and Financial Stability Issues," Working Papers 1002, Hong Kong Monetary Authority.
    2. Dong He & Robert N McCauley, 2012. "Eurodollar banking and currency internationalisation," BIS Quarterly Review, Bank for International Settlements, June.
    3. He, Dong & Wang, Honglin, 2012. "Dual-track interest rates and the conduct of monetary policy in China," China Economic Review, Elsevier, vol. 23(4), pages 928-947.
    4. Corrinne Ho & Guonan Ma & Robert N McCauley, 2005. "Trading Asian currencies," BIS Quarterly Review, Bank for International Settlements, March.
    5. Claudio Borio & Robert McCauley & Patrick McGuire, 2011. "Global credit and domestic credit booms," BIS Quarterly Review, Bank for International Settlements, September.
    6. Robert McCauley, 2005. "Distinguishing global dollar reserves from official holdings in the United States," BIS Quarterly Review, Bank for International Settlements, September.
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    Citations

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    Cited by:

    1. Shu, Chang & He, Dong & Cheng, Xiaoqiang, 2015. "One currency, two markets: the renminbi's growing influence in Asia-Pacific," China Economic Review, Elsevier, vol. 33(C), pages 163-178.
    2. McCauley, Robert, 2013. "Risk-On/Risk-Off, Capital Flows, Leverage and Safe Assets," Journal of Financial Perspectives, EY Global FS Institute, vol. 1(2), pages 145-154.
    3. Robert N McCauley & Chang Shu & Guonan Ma, 2014. "Non-deliverable forwards: 2013 and beyond," BIS Quarterly Review, Bank for International Settlements, March.
    4. Batten, Jonathan A. & Szilagyi, Peter G., 2016. "The internationalisation of the RMB: New starts, jumps and tipping points," Emerging Markets Review, Elsevier, vol. 28(C), pages 221-238.
    5. Zhang, Liqing & Tao, Kunyu, 2014. "The Benefits and Costs of Renminbi Internationalization," ADBI Working Papers 481, Asian Development Bank Institute.
    6. Ma, Guonan & McCauley, Robert N., 2013. "Is China or India more financially open?," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 6-27.
    7. Yin-Wong Cheung, 2014. "The Role of Offshore Financial Centers in the Process of Renminbi Internationalization," Macroeconomics Working Papers 24049, East Asian Bureau of Economic Research.
    8. Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.
    9. Stefan Avdjiev & Robert McCauley & Patrick McGuire, 2012. "Rapid credit growth and international credit: Challenges for Asia," BIS Working Papers 377, Bank for International Settlements.
    10. repec:wsi:ceprxx:v:02:y:2013:i:01:n:s1793969013500039 is not listed on IDEAS
    11. Emanuel Kohlscheen & Phurichai Rungcharoenkitkul, 2015. "Changing financial intermediation: implications for monetary policy transmission," BIS Papers chapters,in: Bank for International Settlements (ed.), What do new forms of finance mean for EM central banks?, volume 83, pages 65-78 Bank for International Settlements.
    12. Samar Maziad & Joong S Kang, 2012. "RMB Internationalization; O+L5022nshore/Offshore Links," IMF Working Papers 12/133, International Monetary Fund.
    13. Lynne Cockerell & Michael Shoory, 2012. "Internationalising the Renminbi," RBA Bulletin, Reserve Bank of Australia, pages 77-90, June.
    14. Guonan Ma & Agustin Villar, 2014. "Internationalisation of emerging market currencies," BIS Papers chapters,in: Bank for International Settlements (ed.), The transmission of unconventional monetary policy to the emerging markets, volume 78, pages 71-86 Bank for International Settlements.
    15. repec:eee:phsmap:v:483:y:2017:i:c:p:219-226 is not listed on IDEAS

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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