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Issues for Renminbi Internationalization: An Overview

  • Eichengreen, Barry

    (Asian Development Bank Institute)

  • Kawai, Masahiro

    (Asian Development Bank Institute)

This paper provides an overview of the potential international role of the renminbi (RMB). Reviewing the current state, the paper finds that much progress has been made on RMB settlements for trade involving the People’s Republic of China (PRC) and on RMB-denominated bond issuance in Hong Kong, China, but that RMB internationalization is still limited due to capital account controls. It argues that a high degree of RMB internationalization requires significant capital account liberalization, which in turn would call for greater exchange rate flexibility so that the central bank can enjoy monetary policy autonomy. This, however, would pose a challenge for PRC authorities as hasty capital account liberalization could expose its financial markets to the risk of crisis. The paper also emphasizes the importance of institutional reforms to make the RMB a truly international reserve currency.

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File URL: http://www.adbi.org/files/2014.01.20.wp454.issues.renminbi.internationalization.overview.pdf
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Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 454.

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Length: 22 pages
Date of creation: 21 Jan 2014
Date of revision:
Handle: RePEc:ris:adbiwp:0454
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  1. Nicholas R. Lardy & Nicholas Borst, 2013. "A Blueprint for Rebalancing the Chinese Economy," Policy Briefs PB13-2, Peterson Institute for International Economics.
  2. Eswar S. Prasad & Raghuram G. Rajan, 2008. "A Pragmatic Approach to Capital Account Liberalization," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 149-72, Summer.
  3. Obstfeld, Maurice & Rogoff, Kenneth, 2009. "Global Imbalances and the Financial Crisis: Products of Common Causes," CEPR Discussion Papers 7606, C.E.P.R. Discussion Papers.
  4. Edwin M. Truman & Anna Wong, 2006. "The Case for an International Reserve Diversification Standard," Working Paper Series WP06-2, Peterson Institute for International Economics.
  5. Michael W. Klein, 2012. "Capital Controls: Gates versus Walls," NBER Working Papers 18526, National Bureau of Economic Research, Inc.
  6. Claudio Borio & Piti Disyatat, 2011. "Global imbalances and the financial crisis: Link or no link?," BIS Working Papers 346, Bank for International Settlements.
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