The Full Convertibility of Renminbi: Sequencing and Influence

Shucheng Liu, Zhijun Zhao, Yue Ma, Matthew S. Yiu, Yak-yeow Kueh and Shu-ki Tsang
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Shucheng Liu: Economics Institute, Chinese Academy of Social Sciences
Zhijun Zhao: Economics Institute, Chinese Academy of Social Sciences
Matthew S. Yiu: Hong Kong Institute for Monetary Research
Yak-yeow Kueh: Lingnan University
Shu-ki Tsang: Hong Kong Baptist University

No 92002, Working Papers from Hong Kong Institute for Monetary Research

Abstract: This paper examines the issue of achieving full convertibility for the Chinese currency, Renminbi (RMB), and its impact on the economies of both mainland China and Hong Kong. It focuses on the sequencing of Renminbi¡¦s full convertibility, clarifying the different concepts of currency convertibility, i.e. current account convertibility, capital/financial account convertibility, and full convertibility. It also discusses the differences between removing restrictions on international transactions and removing restrictions on the exchange of foreign currencies. There still exist various extremely strict restrictions on capital/financial account convertibility in China. There is still a long way to go before these restrictions can be removed completely. China¡¦s accession to the World Trade Organization (WTO) will surely drive the course of Renminbi¡¦s full convertibility. However, the Renminbi may not become a fully convertible currency within the five years after China¡¦s accession to the WTO. This paper comes to the conclusion that there does not exist a uniform or fixed sequence in adopting the full convertibility of a currency due to the differences between countries. At the same time, based on the common practices and basic sequence taken by most countries in the world, drawing on the experience and lessons from other countries¡¦ practice and given the fact that China is a large developing country, we also conclude that a progressive and prudent sequential process is needed for the full convertibility of Renminbi.

Keywords: convertibility of Renminbi; WTO; China; Hong Kong (search for similar items in EconPapers)
JEL-codes: F31 G18 O11 O41 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2002-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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