The Full Convertibility of Renminbi: Sequencing and Influence

45 Pages Posted: 27 Aug 2007

See all articles by Shucheng Liu

Shucheng Liu

Chinese Academy of Social Sciences (CASS) - Institute of Economics; Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Zhijun Zhao

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Yue Ma

City University of Hong Kong (CityU) - Department of Economics & Finance

Matthew S. Yiu

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Y.Y. Kueh

affiliation not provided to SSRN

Shu-ki Tsang

Hong Kong Baptist University (HKBU) – Department of Accountancy and Law - Department of Economics

Date Written: April 2002

Abstract

This paper examines the issue of achieving full convertibility for the Chinese currency, Renminbi (RMB), and its impact on the economies of both mainland China and Hong Kong. It focuses on the sequencing of Renminbi's full convertibility, clarifying the different concepts of currency convertibility, i.e. current account convertibility, capital/financial account convertibility, and full convertibility. It also discusses the differences between removing restrictions on international transactions and removing restrictions on the exchange of foreign currencies. There still exist various extremely strict restrictions on capital/ financial account convertibility in China. There is still a long way to go before these restrictions can be removed completely. China's accession to the World Trade Organization (WTO) will surely drive the course of Renminbi's full convertibility. However, the Renminbi may not become a fully convertible currency within the five years after China's accession to the WTO. This paper comes to the conclusion that there does not exist a uniform or fixed sequence in adopting the full convertibility of a currency due to the differences between countries. At the same time, based on the common practices and basic sequence taken by most countries in the world, drawing on the experience and lessons from other countries' practice and given the fact that China is a large developing country, we also conclude that a progressive and prudent sequential process is needed for the full convertibility of Renminbi.

Keywords: convertibility of Renminbi, WTO, China, Hong Kong

JEL Classification: F31, G18, O11, O41

Suggested Citation

Liu, Shucheng and Zhao, Zhijun and Ma, Yue and Yiu, Matthew S. and Kueh, Y.Y. and Tsang, Shu-ki, The Full Convertibility of Renminbi: Sequencing and Influence (April 2002). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 09/2002, Available at SSRN: https://ssrn.com/abstract=1009162 or http://dx.doi.org/10.2139/ssrn.1009162

Shucheng Liu

Chinese Academy of Social Sciences (CASS) - Institute of Economics

2 Yuetan Beixiaojie
Beijing, Beijing
China

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

3 Garden Road, 8th Floor
Hong Kong
China

Zhijun Zhao (Contact Author)

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

3 Garden Road, 8th Floor
Hong Kong
China

Yue Ma

City University of Hong Kong (CityU) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/yuema24

Matthew S. Yiu

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR) ( email )

55/F Two IFC
8 Finance Street, Central
Hong Kong, HK
China
+852 2878 1974 (Phone)
+852 2878 7006 (Fax)

Y.Y. Kueh

affiliation not provided to SSRN ( email )

No Address Available

Shu-ki Tsang

Hong Kong Baptist University (HKBU) – Department of Accountancy and Law - Department of Economics ( email )

China

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