The study entitled “Renminbi’s Potential to Become a Global Currency” analyzes the critical economic, financial and policy attributes that are required to support a currency in order for it to gain an international role, and examines if the RMB has the potential to acquire these attributes. The paper also offers some provisional observations about the implications for Asia and the global economy, should the RMB evolve into a world currency.
“The prospect of RMB internationalization is closely associated with its convertibility as well as depth and openness of the capital market. It would be too optimistic to expect the RMB to become a global currency before 2025, as it would require a number of fundamental economic, financial, regulatory and political reforms to remake China into a global and responsible stakeholder”, said lead author, Professor Friedrich Wu from the S. Rajaratnam School of International Studies, Nanyang Technological University of Singapore.
The international monetary system is currently dominated by the ‘Big Three’ currencies namely, the US dollar, the euro and the yen. For a currency to gain international status, there must be strong demand for the currency as a medium of exchange, a unit of account and a store value. In addition, the size of the economy, its trade volume, as well as the stability and convertibility are vital pre-requisites in the internationalization of a currency.
Professor Wu added, “The current global crisis has led to a continuous downward pressure on the US dollar, hence diminishing the role of the greenback to some extent. Although the RMB is still not in a position to challenge the pre-eminent role of the US dollar in the foreseeable future, it is very likely to evolve into a regional currency in the medium term.”
This article is published in China & World Economy (Vol. 18, Issue 1, pp. 63-81). Media wishing to receive a PDF of the full study should contact Alina Boey, Senior Manager, Corporate Communications.
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About China & World Economy
China & World Economy was launched in 1993 by the Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS). Originally self-published, the journal begins its official publishing partnership with Blackwell Publishing in 2006. Published six times a year, this journal combines original academic research works with policy review articles - many of its authors are distinguished Chinese economists from both academic and governmental circles. As the only English language journal in China devoted to the topic of Chinese economics, readers can expect objective, analytical and up-to-date quality content. With distinguished contributors such as economists from both the government and academic circles, the journal will provide an informed and balanced window on China, and will undoubtedly become essential reading for all those interested in China's development.
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