Overcoming Chinese Monetary Division and External Anchoring in East Asia

27 Pages Posted: 14 Dec 2003

See all articles by George M. von Furstenberg

George M. von Furstenberg

Indiana University

Jianjun Wei

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

Abstract

There are few recent historical precedents for maintaining the high degree of separation between internal monetary arrangements that still prevails between Hong Kong and Mainland China. This paper anticipates the erosion of this separation and considers the economics of the different forms which monetary unification of China could take. It argues that achieving such unification without resort to capital controls or expropriation is a precondition for developing a second major international currency in East Asia, rivaling the yen. Until the renminbi has established itself as an international currency inside a unified and sound financial system that is up to Hong Kong's current standards, there can be no progress toward a regional monetary union in East Asia. While an internal goal of Chinese Monetary Union is banking reform and financial integration, an external goal is to help emancipate both China and East Asia as a whole safely from the U.S. dollar standard.

Keywords: Chinese monetary union, monetary union, dollarization, Hong Kong dollar, Renminbi, monetary history

JEL Classification: F33, F41

Suggested Citation

von Furstenberg, George M. and Wei, Jianjun, Overcoming Chinese Monetary Division and External Anchoring in East Asia. Asian Economic Papers, Vol. 3, No. 1, pp. 27-54, Spring 2004. Available at SSRN: https://ssrn.com/abstract=472263 or http://dx.doi.org/10.2139/ssrn.472263

George M. Von Furstenberg (Contact Author)

Indiana University ( email )

Department of Economics
Wylie Hall, Indiana University
Bloomington, IN 47405-6620
United States
812-856-1382 (Phone)
812-855-3736 (Fax)

HOME PAGE: http://mypage.iu.edu/~vonfurst/

Jianjun Wei

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

3 Garden Road, 8th Floor
Hong Kong
China

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