Enrichment
The Rise of the Renminbi
10th December 2016
The IMF's Finance and Development magazine (December 2016) carries an interesting book review on the rise of the Yuan / renminbi as an international currency and the complexity of China's currency strategy since it unpegged formally from the US dollar in July 2005.
At the heart of the story is the desire of Chinese policy-makers to reap many of the benefits of a market-based economic system but at the same time opting to keep political control an reverting back to a central planning mentality when events dictate. Here is a juicy quote:
"Chinese political elites who want the freedom of choice inherent in a market economy but, at the same time, display a deeply held risk aversion that repeatedly leads them back to a central planning mind-set and the assertion of government control over outcomes (particularly when growth looks like it’s flagging)."
The chart below shows the acceptance among international companies to use the Chinese yuan as currency for cross-border trade and settlements as of February 2015, by country.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.
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