Crossing this Chinese river needs building a large bridge

Visitors look at the art work by American artist Tony Oursler entitled 100 Yuan which features a projection of a Chinese renminbi note with a talking Mao Zedong at a gallery in Beijing, China. (Photo: AAP).

Author: Peter Drysdale, Editor, East Asia Forum

China’s approach to economic reform is commonly characterised by Deng Xiaoping’s metaphor of ‘crossing the river by feeling the stones’. This is the experimental approach to economic and social reform. It is typified by the successful implementation of the household responsibility system that saw the transformation of Chinese agriculture and the early liberalisation of trade and investment through the establishment of Special Economic Zones together with economic experimentation in Guangzhou. Read more…

The forces driving RMB internationalisation

A Chinese clerk counts renminbi banknotes at a bank in Xuchang city, Henan province, 8 December 2013. (Photo: AAP).

Author: Yu Yongding, CASS

When renminbi internationalisation was making rapid progress in 2011, some leading investment banks predicted that by the end of 2012 Hong Kong’s offshore RMB deposits would reach more than 1 trillion yuan, cross-border RMB trade settlement would surpass 3.7 trillion yuan, and RMB-denominated bonds and loans would grow to 700 billion yuan. These predictions were way off the mark. However, on the other hand, RMB trade settlement has maintained its growth momentum: Read more…

Financial scenarios for Asia and the world

Visitors look at jewellery displayed at a jewellery fair to attract Chinese consumers in Shanghai, China. (Source: AAP)

Author: Andrew Sheng, Fung Global Institute

The Asian century is a foregone conclusion, but no-one has clarified whether it will be good or bad for Asia.

The region has 60 per cent of the world’s population and, according to Asian Development Bank estimates, will probably be responsible for half of global GDP and financial assets by 2050. Asia is too big to ignore and too diverse to be able to predict how it will shape this century. Read more…

Experimenting with the Chinese currency

A Chinese clerk counts yuan bills at a bank in Suzhou city, southeast Chinas Jiangsu province on 31 December 2012. (Photo: AAP)

Author: Liu Dongmin, IWEP

After becoming the new Chinese leader, Xi Jinping chose Shenzhen as his first visit outside Beijing and made the Qianhai special economic zone his first stop in Shenzhen. This was a clear signal of Qianhai’s position at the forefront of further reform and opening in China. Read more…

Renminbi internationalisation and the international monetary system: a match made in heaven

This photo taken on 9 October 2011 shows pedestrians walking past a currency exchange outlet in Hong Kong with the rates (815/824) against the Chinese yuan posted in the window. China is resisting US demands to speed up yuan reforms and let its currency appreciate at a faster pace, even as it pursues a long-term goal of making the unit more widely used overseas, analysts say. (Photo: AAP)

Author: Sourabh Gupta, Samuels International

On 2 November, on the sidelines of the G20 leaders meeting in Cannes, Zhang Tao, director general of the international department of the People’s Bank of China (PBoC), averred that China’s foreign exchange management strategy was based on ‘the principle of safety, liquidity and adding value’.

Given the US$271 billion in reserve losses presumed to have accrued during the 2003-2010 period as a result of the US dollar’s depreciation, this notion of ‘safety’ appears to be a rather elastic one. Read more…

China moves slowly to internationalise the renminbi

The idea of the Chinese RMB as a reserve currency is becoming increasingly popular both in China and abroad. (Photo: AAP)

Author: Wang Yong, Peking University

For those interested in the internationalisation of China’s national currency, the renminbi, and hence anyone interested in the future of the global currency system, Vice Premier Li Keqiang’s recent visit to Hong Kong was an important event.

The Vice Premier announced on 17 August 2011 the central government’s ‘Six Measures’ to support Hong Kong’s economic development — a move welcomed by Chinese media and businesses. The measures include a quota of RMB20 billion (US$3 billion) for renminbi Qualified Foreign Institutional Investors (RQFIIs) to invest in mainland China’s RMB-denominated securities market; allowing mainland Chinese investors to conduct business in the Hong Kong Stock Exchange’s exchange-traded funds; and issuing RMB20 billion in RMB-denominated bonds in Hong Kong. Read more…

China’s current account surplus and inflation

Piles of containers at Waigaoqiao Container Port are seen March 3, 2009 in Shanghai, China. (Photo: AAP)

Author: Yang Yao, Peking University

China’s exports have resumed their robust growth since last year. The World Bank predicts a 3.5 per cent growth rate for the world economy this year, and most analysts also predict that the US economy will grow at a similar rate.

As a result, external demand for China’s exports will be strong. Read more…

Prospects for France’s presidency of the G20

French Finance Minister Christine Lagarde, left, shakes hands with US Treasury Secretary Timothy Geithner during the family picture of the G20 Finance summit at Bercy Finance Ministry in Paris on 19 February 2011. (Photo: AAP)

Author: Barry Carin, CIGI

The G20 is again in the news following the February 2011 Finance Ministers’ meeting with media coverage dominated by news that leaders agreed on a ‘list of indicators to identify and reduce trade imbalances.’

This development comes under France’s G20 presidency, which inherits an unfinished agenda from past G20 summits. Read more…

Fixing global economic imbalances

Finance ministers and central bank governors pose for a group photo during the G20 Finance meeting in Paris, 19 February 2011. (Photo: AAP)

Author: Peter Drysdale, ANU

The G20 Finance Ministers’ meeting in Paris over the weekend clinched a deal on the indicators that will be used to evaluate and to tackle the economic imbalances, said to be at the heart of managing recovery from the global crisis.

Importantly, China signed on to the deal, the announcement of which reports that trade balance and investment flows will be monitored ‘taking due consideration of exchange rate, fiscal, monetary and other policies.’ Read more…

China’s role in running the world economy

A man and a woman stand in front of a shop showing Barbie, product of US toy manufacturer Mattel, in Shanghai. Since the US consumer is no longer the main growth engine of the global economy, experts are looking at China but are sceptical the Asian giant can fill that huge role. (Photo: AAP)

Author: Peter Drysdale, ANU

China’s emergence as the second largest economy in the world, and on some reckoning an economy that is already nudging America for the top spot, inevitably raises questions about how this remarkable and rapid shift in world power will affect the global economic order as we know it and what role China can now be expected to, and will, play in running the world economy.

At the end of the Second World War, the United States bequeathed the GATT, IMF and World Bank-based international system and assumed leadership in establishing the rules and norms in running the global economy. Read more…

On China’s renminbi becoming a world currency

A teller counts US and Chinese currencies at a branch of Huaxia Bank in Shenyang, northeast China, 14 January 2011. The Chinese currency reached a new high of 6.5977 against the US dollar. The move came ahead of the 18-21 January visit to the United States by President Hu Jintao. (Photo: AAP)

Author: Peter Drysdale, ANU

American authorities have been baying for months about flexing up the renminbi (RMB — the Chinese currency) to help turn around China’s current account surpluses and reduce America’s deficits. Whether a sharp appreciation in the rate of exchange between the RMB and the US dollar should be relied on as the main instrument for effecting that change smoothly is a much debated question.

Appreciation of the RMB is certainly one crucial part of the solution, but there are also more fundamental structural problems that need to be dealt with to cut back China’s net international savings and achieve the reverse in the United States. Read more…

Is a currency war unavoidable?

Renminbi and the US dollar. (Flickr user 'Photoshot2010')

Author: Yiping Huang, Peking University and ANU

One of the policy issues at the top of the agenda at the recently concluded G20 summit was global rebalancing.  Achieving strong, balanced and sustained growth was identified by the G20 leaders as a key policy objective.

While G20 officials agreed to allow greater roles for market forces in exchange rate formulation, they also emphasised the need for structural reforms in order to resolve global imbalances. Read more…