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The People’s Republic of China’s Financial Markets: Are They Deep and Liquid Enough for Renminbi Internationalization?

Author

Listed:
  • Cruz, Prince Christian

    (Asian Development Bank Institute)

  • Gao, Yuning

    (Asian Development Bank Institute)

  • Song, Lei Lei

    (Asian Development Bank Institute)

Abstract

Domestic financial market development is a key determinant of a currency’s international status, and financial depth and market liquidity are two essential attributes for an international currency. This paper discusses the status of the People’s Republic of China’s (PRC) financial markets and their depth and liquidity conditions. The paper also compares the PRC’s financial markets with those in developed and emerging economies, contemporaneously and historically. The paper finds that the PRC’s financial markets are not as deep and liquid as those in developed economies, and are much less so than those with international currencies. To support the internationalization of the renminbi, the PRC needs to remove several major obstacles to deepen its financial markets and improve their liquidity conditions.

Suggested Citation

  • Cruz, Prince Christian & Gao, Yuning & Song, Lei Lei, 2014. "The People’s Republic of China’s Financial Markets: Are They Deep and Liquid Enough for Renminbi Internationalization?," ADBI Working Papers 477, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0477
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    References listed on IDEAS

    as
    1. Eswar S. Prasad & Lei Ye, 2011. "The renminbi’s role in the global monetary system," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 127-197.
    2. James Vickery & Joshua Wright, 2013. "TBA trading and liquidity in the agency MBS market," Economic Policy Review, Federal Reserve Bank of New York, vol. 19(May), pages 1-18.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. To RMB or not to RMB? Lessons from Currency History
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2014-08-18 15:42:16
    2. China's Capital Controls and the Exchange Rate Regime
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2014-08-28 17:12:18

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    Cited by:

    1. Ming Zhang & Bin Zhang, 2017. "The Boom and Bust of the RMB's Internationalization: A Perspective from Cross-Border Arbitrage," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(2), pages 237-253, July.

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    More about this item

    Keywords

    RMB internationalization; financial depth; bond markets; stock market; money markets;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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