June 22, 2015
RENMINBI ASCENDING: How China's Currency Impacts Global Markets, Foreign Policy, and Transatlantic Financial Regulation
By Chris Brummer
A new report by the Atlantic Council, the City of London Corporation, Standard Chartered and Thomson Reuters launched today in Hong Kong, Asia, continues the highly respected Danger of Divergence series of publications examining transatlantic cooperation and takes us a crucial step closer to understanding the impact RMB internationalization will have on the global financial system and explains how different parts of the evolving Chinese financial infrastructure interact in a changing geostrategic context.
The report, titled "How China's Currency Impacts Global Markets, Foreign Policy, and Transatlantic Financial Regulation" offers and elaborates on five principles for an effective internationalization process of the RMB:
- Agenda setting should be pragmatic, not aspirational;
- Reforms in legal infrastructure must accompany market liberalization to meet growing RMB demand and usage, including transparency in market structure, better accounting and auditing supervision, credible ratings processes, and crisis management;
- Transpacific capacity building is required;
- Prudential concerns, nondiscrimination principles should trump politics;
- The International Monetary Fund should include the RMB in its basket of currencies – and incorporate regulatory reform in its weighting metrics.
The suggestions highlighted above articulate a measured approach for constructively engaging the rising prominence and popularity of the RMB that integrates developments in capital and currency account liberalization, financial regulation, and economic growth for both China and globally.
Governor Jon M. Huntsman, Jr., Chairman of the Atlantic Council, serves as the report's chair, and Atlantic Council C. Boyden Gray Fellow on Global Finance and Growth Dr. Chris Brummer served as rapporteur.
Read the Report (Chinese PDF)