Institution(s): Hong Kong Institute of Economics and Business Strategy, The Hong Kong Centre for Economic Research, Institute for China and Global Development

Date: Jan 17, 2014 (Friday)

Time: 12:00 noon - 02:00 pm

Venue: The Hong Kong Bankers Club (Dragon Room 1), 43/F, Gloucester Tower, 11 Pedder Street, Hong Kong


The present debate on whether the RMB should be internationalized or not is focused too narrowly on the timing of the action.  Because the opening of China's capital account is inevitable, the real issues of concern are (1) whether the RMB would become an international vehicle currency (IVC) like the US$ and the Euro, i.e. be in the small sub-set of internationalised currencies that are used to denominate the prices of traded goods and to denominate international loans; and (2) whether Shanghai would become a 1st-tier international financial center (1-IFC) like London and New York City (NYC), where the value of cross-border transactions is markedly higher than in Frankfurt, and Tokyo.


We propose that (1) even after China has caught up to the U.S. standard of living, its economy still would not be strong enough relative to the US for market forces to naturally ensure the IVC and 1-IFC outcomes for the RMB and Shanghai; and (2) the timing of RMB internationalization can be meaningfully discussed only after China has decided whether the IVC status and 1-IFC status should be core elements in Xi Jinping's China Dream.

File for Download:  Poster-140117.pdf