Renminbi Internationalisation: Precedents and Implications
Journal of Chinese Economic and Business Studies, Vol. 11, No 2, pp. 81-100, 2013
26 Pages Posted: 23 Jun 2017
Date Written: June 1, 2013
It is widely assumed that there are no close precedents against which to benchmark the internationalisation of the renminbi (RMB). This paper argues that this overlooks the PRC’s own recent economic history. This paper shows that efforts to internationalise the RMB in the 1970s offer important policy lessons for the current internationalisation policy. During the 1970s Chinese state-owned banks in Hong Kong played a central in maximising international trade receipts and offering non-deliverable RMB accounts. Capital controls and an astute monetary policy minimised the risk of undue swings in capital flows. Although China no longer faces foreign exchange scarcity, a comparison with the 1970s shows that China has yet to resolve the vulnerabilities in its’s financial institutions. As a consequence Hong Kong has retained its role in mitigating the risks of internationalisation and as a globalising force for China’s banking sector more generally.
Keywords: China, Hong Kong, Renminbi Internationalisation, Banking Reform, Trade
JEL Classification: E42, F63, N10, O24
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