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

See all articles by Damian Tobin

Damian Tobin

University of London, SOAS, Department of Financial and Management Studies

Date Written: June 1, 2013

Abstract

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

Suggested Citation

Tobin, Damian, Renminbi Internationalisation: Precedents and Implications (June 1, 2013). Journal of Chinese Economic and Business Studies, Vol. 11, No 2, pp. 81-100, 2013, Available at SSRN: https://ssrn.com/abstract=2991569 or http://dx.doi.org/10.2139/ssrn.2991569

Damian Tobin (Contact Author)

University of London, SOAS, Department of Financial and Management Studies ( email )

Thornhaugh Street
London, WC1H 0XG
United Kingdom

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