Quantitative easing may in part explain the destabilizing effects that the global economy is facing, with cheap credit continuing to fueling the expectation of ever-rising prices. The 2015 Chinese crash was a direct product of the U.S. financial crisis of 2008, which was itself the result of a bubble in financial, insurance, and real estate assets.
If China’s economic growth is still under a big downward pressure and China’s central bank further imposes an easy monetary policy, the RMB will go through an increasing pressure of depreciation. Therefore, the inclusion of China’s currency in the SDR basket would be a double-edge sword.
The IMF’s decision to formally include the renminbi as one of five hard currencies in its SDR basket, and the half-decade or so of liberalizing reforms leading into it, is likely to be recorded by economic historians with the corresponding level of attention that is devoted to the establishment of the Federal Reserve System almost-exactly a century ago.
Chinese leadership’s recent engagements points to their persistent pursuit of its vision of connectivity named One Belt One Road (OBOR). New areas are now being added to the list.
SDR status is only a fresh starting point for transforming China from a big financial entity into a strong financial powerhouse. By adding a currency from the developing world, the SDR much better reflects the functions of emerging economies in global economic and financial affairs.
As China’s renminbi has been included in the IMF elite currencies and the Fed has started its rate hikes, conventional wisdom sees the RMB weakening and U.S. dollar strengthening as simple long-term trends. The realities are far more complex, however.
As the labor supply declines and labor cost increases, China must strengthen the supply front to really create new supply and efficiency dividends through reform. Reform on the supply front requires the improvement of capital-formation efficiency for the next five years.
The International Monetary Fund’s recent decision to add the Chinese renminbi to the basket of currencies that determine the value of its reserve asset, the Special Drawing Right, has captured headlines around the world. But the SDR itself has not exactly dominated discussions – much less transactions – since its creation in 1969. So does the decision really matter?
China’s new developmental strategy of “innovative, coordinated, green, open and sharing” economic growth is echoed in the theme for the G20 Hangzhou Summit, demonstrating that a new world economic growth strategy is gradually taking shape. Efforts will be focused on four elements: innovation, improvement upon global governance, promotion of international trade and investment as well as inclusive and concerted development.
As the U.S. moves to recalibrate its own relationships with a rising China on trade, the environment and security issues, its neighbors and allies are forging their own path on building economic, political, and cultural ties.
The first Chief Executive of Hong Kong SAR C.H. Tung argues that the success of modern day China is not accidental. While globalization contributes to China’s success, the country’s ability to ensure a smooth leadership transition and sound policy-making, the diligence of its people, as well as the expansion of freedom liberating the entrepreneurial and innovative spirit of its citizens are key internal reasons for what Tung describes as “China’s miracle.”
With the mix of development of ASEAN’s member countries, high levels of economic integration are a distant dream, and there are even more challenges for political and security policy coordination as well as socio-cultural fusion. But creation of the ASEAN Community is a big step forward in the integration process, and offers potential for its members and trade partners beyond.
When achieving a stable global economy supercedes local and political interests, and a sustainable rebound in the global oil prices begins to emerge, this will soothe the chaos in the geopolitical sphere, the price wars among the oil-producing countries, the sluggish investment and consumption in the world economy, the capital market’s negative judgment about the future business growth and the “liquidity trap” in the monetary policy.
China has emerged as the key trading partner of Central Asia—an accomplishment that is greatly due to Dordoi Bazaar’s success in the region. However, Beijing still has much work to do in order to improve its public image and shorten its soft power deficit in the Central Asian region.
Last month, China’s leaders revealed details of the 13th Five-Year Plan, which will guide the economy’s trajectory until 2020. Gone are the directives to expand industrial production at a breakneck pace that characterized previous five-year plans. Now, the focus is on achieving sustainable long-term growth, underpinned by domestic consumption, a stronger services sector, entrepreneurship, and innovation.