Currency Policy and the Internationalization of the RMB

China’s currency manipulation has long been a hot topic. In many ways, the status quo remains the same: China allows the renminbi (RMB) to appreciate some (about 22 percent overall since July 2005; about 7 percent since June 2010) when it makes sense for China. In the U.S., policymakers make lots of noise about “punishing” China for its currency manipulation, though the U.S. Treasury Department has yet to label China as such.

What are the interconnections between China’s exchange rate policy and the US-China trade imbalance? Where does the U.S. government debt fit into the picture? How does China’s exchange rate policy affect inflation in China? If China and the U.S. are to transition to “more sustainable” economic growth models, how will currency policy have to change? If China’s currency policy were to change, what would that mean for China – and for the U.S.? What would those changes look like?

Those are all questions we’ll address in this Issue in Depth: Currency Policy and the Internationalization of the RMB. We’ll offer a background into China’s exchange rate policy – and all of those interconnections mentioned above – as they stand today, and we’ll look forward to the future.

China has already taken steps to liberalize its currency, most recently by allowing designated banks to trade yuan/foreign currency swaps on behalf of their clients. Some economists believe that the RMB will be fully internationalized – a freely tradable currency on world markets – by 2020. (Others say “Not so fast.”)

Over the next several months we’ll develop this Issue in Depth with data charts and graphs, a review of the current literature, interviews with experts, and our own analysis. The themes we plan to address include:

What is the historical perspective on currency management? What is the history of China’s yuan-dollar peg? What about currency management in the U.S.?
How much does the RMB valuation really matter? Is it just a symptom of an “inappropriate” economic structure?
Why hasn’t the U.S. Treasury Department labeled China a currency manipulator?
How does U.S. monetary policy affect China’s RMB? And vice versa?
How does the RMB peg affect the U.S. dollar, or other currencies and economies?
What role does inflation play?
What is the future outlook for China’s currency? Is internationalization inevitable? What will that entail? Is 2020 realistic?

All of the articles, podcasts, videos, and data charts are commentable so that you can share your thoughts on these important topics. Simply scroll to the bottom of the page and post your comment through Disqus (which will ask you to sign in or comment as a guest). If you’d like to add your perspective as an expert commentator please contact Molly Castelazo at molly@futureofuschinatrade.com.

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