Renminbi Policy and the Global Currency System
Huang Yiping*
China Center for Economic Research
Peking University
(yhuang@ccer.pku.edu.cn)
No. E2010004
March 11, 2010
[Abstract] The global currency system is likely to change significantly after the global financial crisis, but decline of the U.S. dollar may be a gradual process. These would impact China’s renminbi policy, which, in turn, may generate feedbacks on the global system. China may be able to help achieve a smooth and orderly adjustment of the global currency system, which is in China’s best interest. It can gradually increase exchange rate flexibility and diversify foreign reserve investment to facilitate an orderly dollar adjustment. It could also promote IMF’s SDR by linking renminbi to it. The global crisis is likely to accelerate, not to slow, renminbi policy liberalization. And an internationalized renminbi may play very important global and regional roles, provided that, among other conditions, China successfully improved monetary policy mechanisms.
Key words: Global currency system, renminbi, U.S. dollar, reserve currency, Asian currency
* This paper is prepared for Asian Development Bank’s second project meeting on “The Future Global Reserve System: An Asian Perspective” on March 16-18, 2010, in Tokyo. An earlier version was presented at the project’s kick-off workshop on September 16-17, 2009, at the Columbia University in New York and a joint workshop on a similar subject by the Asian Development Bank and the Asian Development Bank Institute on October 30, 2009, in Manila. The Author would like to thank participants of those workshops for helpful comments. Wang Bijun provided capable research assistance.
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