Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/58835 
Year of Publication: 
2012
Series/Report no.: 
IZA Discussion Papers No. 6335
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
We analyze three related but distinct concepts concerning the renminbi's role in the global monetary system: (i) internationalization of the currency; (ii) currency convertibility; and (iii) reserve currency status. Their sequencing in relation to other policy goals such as financial sector reforms and exchange rate flexibility will affect their benefit-risk tradeoffs. We describe the measures taken and progress attained in each of these areas, and discuss the implications of these changes for the balance and sustainability of China's own economic development as well as the associated implications for the global monetary system. While China is actively promoting the internationalization of its currency, it is a long way from attaining full convertibility or meeting other prerequisites for achieving reserve currency status. Ultimately, China will proceed with capital account convertibility in its own controlled and gradual manner, with the goal being an open capital account but with significant administrative and other soft controls. The renminbi will play an increasingly important role in the international monetary system but is unlikely to displace the U.S. dollar anytime soon.
Subjects: 
international monetary system
reserve currency
capital account liberalization
convertibility
exchange rate flexibility
JEL: 
F3
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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