Renminbi Internationalization and Stability of the International Monetary System

This paper investigates the stability of the international monetary system using the new open economic analysis framework. Our research has discovered that conditions for the stability of the international monetary system are such that the economic volume of reserve currency countries must be large enough and that the solvency capacity growth rate of reserve currency countries should be no lower than the real output growth rate of non- reserve currency countries and the real return of the reserve currency,＂ the existence of the valuation effect cannot secure the stability of a reserve currency,＂ and inclusion of the euro and the Japanese yen into international reserve currencies cannot stabilize the international monetary system, while Renminbi internationalization plays an irreplaceable role to the stability of the international monetary system.

The Institutional Supply of China＇s Participation in the International Monetary System Reform

There exist dual features of internationalization and regionalization in the current international monetary system, and the U.S. dollar is still in a dominant position in the system. A lack of relevant institutional constraints has led to institutional deficiencies and systematic risks in the international monetary system, and resulted in the frequent financial crises in the world in recent years. As an emerging economy closely related to the current international monetary system, China has responsibilities and obligations to participate actively in international monetary system reform and push forward international monetary system reform through institutional supply.

Study of International Coordination of Chinese Monetary Policy under Open Economy

Preliminary study is made to the international coordination of national monetary policy under economic globalization and informationalization. This paper uses Game Theory to analyze the operation effect of Chinese monetary policy. It suggests that the maximum effect of Chinese monetary policy can only be achieved by cooperation and coordination with international society.

The Exorbitant Privilege of US Treasuries and China's Choices in the New Era

After the decoupling of the US dollar from gold in 1971,US Treasuries replaced gold as the value benchmark of the international monetary system and acquired an exorbitant privilege.Subsequently,the total amount of US debt exhibited an exponential expansion trend,unbound by any substantial constraints.The so-called debt ceiling is a partisan game rather than a rigid fiscal constraint on the United States.As long as there are no fundamental changes in the global monetary system,the international credit of US Treasuries will stay stable,and their trend of infinite expansion will be sustained.Massive quantitative easing policies have failed to significantly shake this stability,and the notion of global investors offloading US Treasuries is more an illusion than a fact.The exorbitant privilege of US Treasuries grants its federal government the“freedom to borrow,”shielding the American financial sector from due penalties during global financial crises and securing excessive returns in global capital cycles.In the old days when running“twin surpluses”on capital and current accounts,China kept the value of Renminbi low to support its export manufacturing sector along the southeast coast.As a result,China accumulated huge foreign exchange reserves,mainly US Treasuries.Nowadays,this practice is no longer necessary,yielding low returns and posing significant security risks.

Echell Mobil System in IMF： Foreign Currency Exchange

Echell Mobil is to use third variable in currency system. A criterion for becoming Echell Mobil is trade relations. In Echell Mobil system, Echell Mobil countries print and issue dollar banknote and distribute it to partner country. American Fed implemented Quantity Enlargement Policy during the 2008 crises. Fed directly distributes dollars in quantity enlargement. Echell Mobil is similar to Quantity Enlargement Policy. However, it is different from Quantity Enlargement Policy. There is a third variable in Echell Mobil and this third country issues dollar and distributes to partner country. Iceland may become Echell Mobil of European Union and Jordan may become Echell Mobil of Turkey.

A Regional Repo Market Initiative for Global Financial Stability

The prevailing global financial system suffers from a shortage of good collateral for increased reliance on nonbank secured lending. Given that the global financial crisis was mainly triggered by the collapse of the collateral pool for dealer-based credit intermediation, this issue needs to be resolved quickly for normalized credit supply. Primarily, increased supply capacity for safe assets that can serve as valid collateral is the key agenda. This would be possible with a better use of USTs that are kept in EME silos and a broader recognition of an emerging market sovereign collateral pool. The inclusion of new collateral into the expanded and invigorated repo system that includes Asia would stabilize global capital flows and improve financial stability. In a related context, a market-driven, risk-mitigating regional repo market initiative would also bring balance to an increasingly market-driven financial ecosystem and mitigate the global shortage of safe assets.

Enhanced Special Drawing Rights＂ How China Could Contribute to a Reformed International Monetary Architecture

Since the end of the Bretton Woods era, the world has operatea on a ae jacto system of free-floating exchange rates, with the US dollar as the dominant international currency. The system, characterized by large pro-cyclical capital flows and chronic imbalances, is inherently unstable, and has contributed to repeated crises, recessions and geopolitical tensions. One potentially ＂least-difficult＂ line of reform would be to allow the evolution of a multi-currency system, underpinned by an expanded role for Special Drawing Rights （SDRs）. Attempts to promote wider use of the SDR have foundered on the liquidity premium. However, for Chinese corporations and institutions, at present restricted in their capital account activities, the SDR liquidity premium would appear less daunting, The Chinese authorities eould provide policy encouragement for the use of SDRs by their institutions. This initiative, supported by China＇s Special Administrative Region Hong Kong, would kick-start an international SDR ecosystem, and encourage even broader use of SDRs, to the benefit of international monetary stability.

Worldwide Inflation and International Monetary Reform:Exchange Rates or Interest Rates?

The international dollar standard is malfunctioning. Near-zero US short-term interest rates launch massive hot money outflows into emerging markets （EM） in Asia and Latin America. Each EM central bank buys dollars to prevent its currency from appreciating but loses monetary control. Despite some appreciation, average inflation in EMs is now much higher than in the old industrial economies and world commodity prices are bid up sharply. This inflation on the dollar ＇s periphery only registers in the US CPI with a long lag. However, the more immediate effect of the Fed＇s zero interest rate is to upset the process of bank intermediation within the American economy. Bank credit continues to decline while employment languishes. Therefore, constructive international monetary reform calls for the Fed to abandon its zero-interest rate policy, which is best done in cooperation with the European Central Bank, the Bank of Japan, and the Bank of England also abandoning their ultra low interest rates.

The RMB/US Dollar Exchange Rate—An International Political Economy Perspective

This paper looks at the foreign exchange rates （FX rates） and specifically the RMB/US dollar exchange rate issue from the international political economy （IPE） perspective. It argues that in reality, the US-China debate on the renminbi （RMB） exchange rate and the new reform initiated on July 21,2005 is Hot only an economic issue, but more than that, an issue of political economy, that is determined by the dynamic interaction of various economic and political factors at both the national and international levels.

The Role of Institutions:A Cross-country Analysis of Renminbi Trading in Foreign Exchange Markets

We explore how China's geographically targeted policies impact RMB overseas use individually or in combination.The policies include swap agreements,clearing banks,investment quotas,and direct trading between Chinese renminbi(RMB)and non-USD currencies.Adopting a fuzzy-set qualitative comparative analysis and using Bank of International Settlements cross-country data on foreign exchange markets,we find that institution building has lowered the barriers to international adoption of the RMB.Specifically,for countries economically close to China,high RMB trading is explained by either(i)having a clearing bank in the host market and direct quotations between the RMB and the local currency,or(ii)being a financial center and having access to the Chinese capital market.This combination of policies is explained by the creation of(i)"trading posts"that provide RMB liquidity abroad,and(ii)channels that allow actors to " recycle" offshore RMB funds.We triangulate our results with interviews conducted with senior People’s Bank of China officials.