China''s currency, the renminbi (RMB), has taken the world by storm. The RMB is well on its way to becoming a significant international currency, one that is used widely in international trade and finance. This book documents the RMB''s impressive rise, with China successfully adopting a unique playbook for promoting its currency. China''s growing economic might, expanding international influence, and the rise of its currency are all intricately connected. The book documents how China''s government has tied these goals together, enabling faster progress towards each of them. But there are many pitfalls ahead, both for China''s economy and its currency. The book shows how the government has so far navigated its way around domestic and international dangers, but enormous risks still lie ahead. The International Monetary Fund has elevated the RMB to the status of an official reserve currency, a currency that foreign central banks use to keep their rainy day funds. If China plays its cards right, with reforms that put its economy and financial markets on the right track, the RMB is going to become an important reserve currency that could rival some of the traditional reserve currencies such as the euro and the Japanese yen. But this book argues that there are limits to the RMB''s ascendance-the hype about its inevitable rise to global dominance is overblown. The Chinese leadership''s apparent commitment to financial sector and other market-oriented reforms-coupled with unambiguous repudiation of political, legal, and institutional reforms-sets the RMB on a clear course. It will attain the status of a reserve currency over time but has essentially given up its claim of being seen as a safe haven currency, one that investors turn to for safety. The RMB will erode but not seriously challenge the U.S. dollar''s dominance in international finance.
Industry Reviews
"...a clear and even fascinating account of the structures and quirks of China's financial markets. Prasad combines a practitioner's technical grasp of the subject with a nonacademic clarity of style that will enlighten novices as well as professionals experienced in Chinese finance."
-- Financial Analysts Journal
"[Prasad] take[s] pains to place the attempt to internationalize the renminbi in its historical context."
-- Foreign Affairs
"One of the world's leading experts on international finance, Prasad clearly explains what China has to do to make the renminbi a global currency."
-- Ben S. Bernanke, Distinguished Fellow in Residence, Brookings Institution, and Former Chairman of the Board of Governors of the Federal Reserve System
"Skillfully drawing on history, international economics and a unique in-depth knowledge of the country, Eswar Prasad provides a compelling and comprehensive assessment of China's role in global currency markets-past, present and future. Containing an analytical road map with key markers, this fascinating book will be of particular importance to all those interested in the prospects for China's growing global prominence and its systemic influence, not only
economic and financial but also geo-politically."
-- Mohamed El-Erian, Chief Economic Adviser at Allianz, former CEO of PIMCO, and author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
"A clear and comprehensive entrée to contemporary debate over the direction of China's financial development, with an eye to how the yuan will impinge international financial markets in the future. Extraordinarily helpful for students interested in the nuances of Chinese financial policy, for investors interested in risks inherent in the Chinese development model, and for policymakers who want to better understand how to deal with the rise of China."
-- Kenneth Rogoff, Thomas D Cabot Professor of Public Policy, Harvard University
"In this nuanced, thorough, and balanced book, Prasad -- one of the preeminent authorities on China's economy -- chronicles how and why the RMB is emerging as a significant international reserve currency. At the same time, he explains that, absent sweeping changes to China's political, legal, regulatory, and banking systems, the RMB is unlikely to tap its full potential and become a 'safe haven' currency. The book will be extremely useful to anyone looking to
make sense of the intricacies of China's economic system -- where it stands today, and where it's going tomorrow."
-- Robert E. Rubin, Co-Chairman, Council on Foreign Relations, and Former U.S. Treasury Secretary
"The renminbi and its fluctuations will be a key determinant of what happens globally over the next decade. In this important book, Eswar Prasad looks to the past to understand the present and to forecast the future. It is the definitive book on the renminbi."
-- Lawrence H. Summers, President Emeritus and Charles W. Eliot University Professor of Harvard University
