The Internationalization of the RMB, Capital Market Openness, and Financial Reforms in China
27 Pages Posted: 24 Feb 2015
Date Written: February 12, 2015
This paper provides an overview of Chinese financial and trade integration in recent decades, and the challenges facing China in the coming years. China had been a prime example of export-led growth, benefiting from learning by doing, and by adopting foreign know-how, supported by a complex industrial policy. While the resultant growth has been spectacular, it comes with hidden but growing costs and distortions. The Chinese export-led growth path has been challenged by its own success, and the Global Financial Crisis forced China toward rebalancing, which is a work in progress. Reflecting on the internationalization of the CNY, one expects the rapid accelerating of the commercial internationalization of the CNY. In contrast, there are no clear-cut reasons to rush with the full CNY financial internationalization: The gains from CNY financial internationalization are overrated.
Keywords: export led growth, CNY internationalization, mercantilism, financial integration, FDI
JEL Classification: E6, F3, F4, F6, O2, O4
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