Renminbi Rising

List of Figures xi List of Tables xiii Foreword xv Acknowledgments xvii About the Author xix CHAPTER 1 Internationalizing the RMB 1 The Conditions for Becoming a Global Currency 2 Business and RMB 10 RMB-Product Markets 11 Reserve Currency 14 The Emerging Monetary Order 16 CHAPTER 2 The Rise and Fall of Currencies - Historical Lessons for the RMB 21 Risks in International Monetary System Transitions 23 The Role of Eurodollars in the 2008 Global Financial Crisis 26 2008: Year Zero for a New International Monetary System? 27 Conditions for Currency Internationalization: Market Demand and Institutional Supply 30 Institutional Inertia and Disruptive Events 35 Offshore Currencies and International Liquidity 36 Current International Reactions to the RMB's Rise 41 RMB Internationalization 44 Conclusion 46 References 47 CHAPTER 3 Economic and Institutional Foundations for the Rise of the RMB 49 Economic Foundation 49 Surprises 58 New Growth Engines 60 Capital-Account Liberalization 62 Institutional Quality 68 Conclusion 80 References 81 CHAPTER 4 Can the Chinese Bond Market Support a Potential Global Renminbi? 83 Overview of the Chinese Bond Market 84 Chinese Treasury Market in International Perspective 91 A Dilemma and a Bold Public-Debt Consolidation Scheme 98 Government-Backed Debt Securities 103 Conclusion 107 References 107 CHAPTER 5 Waxing and Waning of the Chinese Stock and Banking Markets 109 Chinese Stock Market: Growing Despite Immaturity Flaws 109 A Massive Chinese Banking Market Opening 125 Conclusion 133 References 133 CHAPTER 6 Rising FX Turnover of the RMB 135 Could the Market Accommodate More Global Currencies? 135 What Determines the FX Liquidity of the RMB? 138 Potential for Rising RMB Turnover by Market Segment 143 Conclusion 149 References 150 CHAPTER 7 A Spreading Global Network for RMB Trade 151 The RMB's International Position 152 Hong Kong Still the Dominant Offshore RMB Center 155 More Offshore Centers Catch Up to Spread a Global Network 158 Prospects for Offshore RMB Centers 164 Conclusion 169 References 169 CHAPTER 8 Brief Examples of Business Use of the Internationalizing RMB 171 Samsung's Use of RMB to Reduce Foreign Exchange Conversion Costs 171 Alstom's Use of RMB as Corporate Treasury Currency 173 Chinese Importers' Profit Incentives from Use of RMB Trade Settlement: Changhong 175 Conclusion 178 Reference 178 CHAPTER 9 The RMB as a Reserve Currency 179 Global Perspectives 179 Scale of RMB Holdings 181 Drivers of Change 182 Exchanging RMB in a Crisis 190 Onshore and Offshore Access 190 Offshore Alternatives 191 Conservatives Change Course 192 Roadblocks Ahead? 193 RMB Inclusion in SDR 195 Capital-Account Reform 197 Conclusion 198 References 199 CHAPTER 10 Concluding Reflections 201 Appendix A: China RMB Financial Statistics and Forecasts by Other Institutions 207 Glossary 213 Index 215