Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Politics of China's Currency Internationalisation: Renminbi

174 views

Published on

Assesses political and economic factors and conditions determining China's success for economic reform--in particular currency internationalisation. Empirical cases of City of London and Taiwan.

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

Politics of China's Currency Internationalisation: Renminbi

  1. 1. The Politics of China’s Currency Internationalisation: Regional Renminbi Hubs China at a Cross-Roads, DIIS Conference Dr. Winnie King king.winnie@gmail.com University of Bristol 2016
  2. 2. Restructuring with Chinese Characteristics Assessing nature of what ‘Crossroads’ China is facing necessitates understanding: • Why does China do what it does? • What are China’s concerns? • Where does the market come in? • Government Intervention vs Market Mechanisms • What can it offer? • What can we expect? • Re: Currency and Capital Flows • RMB hubs as a lens of explanation
  3. 3. Motivations (Why does China do what it does?) Currency Internationalisation in Economic Restructuring & Macroeconomic rebalancing • Lessons of 2008 GFC Diversification of Risk; Economic Structure; Dollar Hegemony • Supporting Development Strategy (restructuring economy [supply-side reform], access to resources, right kind of infrastructure, right kind of investment ) • Security Considerations of Growth and Diplomacy (aid & alliances; securing resource and access (One Belt One Road))
  4. 4. Risks (What are China’s concerns?) Risk of Currency Internationalisation in Economic Restructuring & Macroeconomic rebalancing • Vulnerability of capital accounts flows (Responding to 2008; learning from 1998 Asian Financial Crisis) • Regulations and governance of monetary policy • Currency management (stability) • Ignoring this in the face of changing economic context: • Rising cost of labour: up 60% since 2009;; middle income trap; inequality • Rise of alternative destinations for investment and growth in China’s ‘traditional’ labour intensive manufacturing sector: ASEAN
  5. 5. RMB Hubs: Where does the market come in? and What does it offer? Traditional preference for government intervention over the market mechanisms • Strong historical, ideological and socio-economic roots But reform necessitates a greater role for the market • RMB hubs as strategically selected infrastructure • -- for Traditional Economy and New Economic Sectors • -- for Currency Internationalisation • -- as a testing ground • The political and economic logic onshore/offshore rationale
  6. 6. The RMB and China’s Traditional Economy
  7. 7. It’s all about liquidity: RMB as readily available currency
  8. 8. Contribution to New Economy • Niche—Cross-Strait Trade & Investors (Greater China politics) • Resource Pooling (deepening integration) • Development and expansion of new financial instruments and tools (Formosa Bond) • ODI • Institutionalisation of regional financial networks, collaboration and cooperation on regulations, laws, normal practice • Niche—world financial centre (expertise; time zone; innovation) • Upgrading of China’s Financial System and beyond (‘13-5’) • Resource Pooling • Funding [PBoC bond (2015); RMB denominated UK govt debt (2014)] • Greater Transparency • RMB denominated debt • ODI/FDI (‘13-5’) • Taiwan London
  9. 9. Currency Internationalisation and State Legitimacy (What can we expect?) Rebalancing Economic Structure (‘13-5’) Securing and Expansion of Renminbi Market Access (Onshore/Offshore ‘Connect’) • Transformation both China’s and Hub’s asset holdings • Shift between government intervention and allowing market to dominate • August 2015 • Managing expectations (domestic and international) • Improved communication • Win-Win under a ‘New Normal’more opportunities, more volatility, slower profits, maturing management
  10. 10. Thank you

×