Renminbi Internationalization: Prospects and Implications for Economic Integration in East Asia

Yung Chul Park and Chi-Young Song
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Yung Chul Park: Division of International Studies Korea University 51 Anam-dong, Seongbuk-gu Seoul 136-701, Korea
Chi-Young Song: Department of Commerce and Finance Kookmin University 861-1 Jeongnueng-dong, Seongbuk-gu Seoul 136-702, Korea

Asian Economic Papers, 2011, vol. 10, issue 3, 42-72

Abstract: This paper argues that renminbi (RMB) internationalization and China's strategic interests in ASEAN will combine to deepen economic integration and pave the way for creating a de facto RMB bloc consisting of the 10 ASEAN countries, China, Hong Kong, and Taiwan—a grouping we call ASEAN+New3. Such a currency bloc is likely to weaken the initiatives of the existing ASEAN+3 (China, Japan, and Korea) for regional monetary-financial cooperation because neither Japan nor can Korea join the new currency bloc for economic and political reasons. This paper also argues that RMB internationalization would delay the resolution of the trade imbalance between East Asia and the United States because China would be pressured by the other members of ASEAN+New3 to maintain stability of the RMB vis-à-vis the U.S. dollar. © 2011 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Date: 2011
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