Problems that may be brought about due to capital account liberalization should be weighed in RMB’s internationalization

Recently, Professor Zhang Yuyan, the Director of World Economics and Politics Institute of Chinese Academy of Social Sciences, made a speech titled “China’s development strategy under new global order” in Hongru Forum hosted by SIFL Institute.

As to the problem of RMB’s internationalization, Zhang summarized its currently advantageous and disadvantageous conditions, and thought further opening up the capital account is one key of full internationalization of RMB.

When referring to the favorable conditions, Zhang believed one big background is the high international demand of promoting diversification of the international monetary system. After economic crisis, many countries found there existed many problems in binding the global economy to America, especially to the dollars, therefore “promoting pluralistic international monetary system might be the solution for many countries to seek a relatively stable international monetary fund system”, said Zhang Yuyan. This point was also accepted by all parties for many times on G20 Summit.

Then, recently America has been continuously waving its sanction stick to many international financial institutions, including Bank of Paris, UBS, with all kinds of excuses, and frequently giving fine of billions of dollars. At the same time, some domestic enterprises or persons with high income in America transferred their profit or property overseas for evading taxes. What’s worse, the American-led western countries have been deepening and expanding their financial sanction to Russia in Ukraine crisis step by step, which has made not only Russia .  

but also some other countries have suspicion and mistrust on America and its leading dollar system, so that they put more emphasis on their domestic currency in international trade and investment. In a certain sense, “de-dollarization” has been made its first appearance in the world.

Of course, the real driving force of RMB’s internationalization is the continuous enhancement of China’s comprehensive strength.

Meanwhile, we still have some work to do to realize RMB’s comprehensive internationalization, one of which is the problem of further opening up the disputable capital account for the fact that the condition for degree of currency internationalization is to a great extent the free movement of capital and opening of financial services. At present, some domestic scholars believe this process should be accelerated, while others hold a contrary view for they think further opening up the capital account is of great risk and developed countries in financial service field have obvious competitive advantages. In addition, after full opening of the capital account, the requirements on central bank and financial regulation would be even higher.

In consideration of transmission effect of financial crisis, Zhang Yuyan emphasized full research should be done on the advantages and disadvantages that may be brought about by opening up the capital account and we should take advantage of the opportunity to do a good job on opening up the capital account.

CHINA BUSINESS NEWS  | Reporter: Pan Yinru | 2014-9-4