IDEAS home Printed from https://ideas.repec.org/p/ris/adbiwp/0457.html
   My bibliography  Save this paper

Regional Settlement Infrastructure and Currency Internationalization: The Case of Asia and the Renminbi

Author

Listed:
  • Rhee, Changyong

    (Asian Development Bank Institute)

  • Sumulong, Lea

    (Asian Development Bank Institute)

Abstract

The squeeze in United States dollar liquidity that emerged with the global financial crisis highlighted the risks inherent in the current global financial system. Asia was adversely affected by the crisis not only because of its dependence on trade, but also because of its heavy reliance on the US dollar for regional and international transactions. As Asia’s role in the global economy continues to expand, its dependence on the US dollar is bound to increase, raising further its vulnerability to future liquidity shocks. The use of regional currencies for bilateral trade settlement could reduce such vulnerability. As demonstrated by the renminbi trade settlement scheme piloted between the People’s Republic of China; Hong Kong, China; and Macao, China, the existence of appropriate financial infrastructure could reduce the relatively larger costs of bilateral currency transactions compared with triangular transactions through the United States dollar. As most central banks are securities depositories of government bonds, combining trade settlement with government bond securities settlement could also have large synergy effects without substantial extra costs. This proposal does not require full liberalization of the capital account or full deregulation of capital markets, and is more politically feasible in transition. As such, extending the trade settlement scheme to the rest of Asia and appending a government bond payment and securities settlement system could be a practical solution to international monetary system reform and the diversification of settlement currencies.

Suggested Citation

  • Rhee, Changyong & Sumulong, Lea, 2014. "Regional Settlement Infrastructure and Currency Internationalization: The Case of Asia and the Renminbi," ADBI Working Papers 457, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0457
    as

    Download full text from publisher

    File URL: http://www.adbi.org/files/2014.02.05.wp457.regional.settlement.currency.internationalization.pdf
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Olivier Jeanne & Arvind Subramanian & John Williamson, 2012. "Who Needs to Open the Capital Account?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 5119, September.
    2. Daekeun Park & Changyong Rhee, 2006. "Building infrastructure for Asian bond markets: settlement and credit rating," BIS Papers chapters, in: Bank for International Settlements (ed.), Asian bond markets: issues and prospects, volume 30, pages 202-221, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mikko Huotari & Sandra Heep, 2016. "Learning geoeconomics: China’s experimental financial and monetary initiatives," Asia Europe Journal, Springer, vol. 14(2), pages 153-171, June.

    More about this item

    Keywords

    global financial crisis; international monetary system; renminbi internationalization; renminbi trade settlement; government bond payment and settlement;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:adbiwp:0457. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ADB Institute). General contact details of provider: http://edirc.repec.org/data/adbinjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.