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Yuan internationalization not an 'explosion-style reform'

(People's Daily Online)

16:57, June 11, 2012

In the Industrial and Commercial Leaders Forum of the Shanghai Cooperation Organization held in Beijing, Li Daokui, a professor from Tsinghua University said as a very complicated historical course, the yuan internationalization is by no means a shock therapy-style or explosion- style course of reform.

Li explained that the yuan internationalization is an unprecedented and extremely complicated historical course because China has to carry out the financial reform on the one hand and realize the yuan internationalization on the other hand while the yuan capital account convertibility has not been completely realized.

He said that the internationalization courses of such currencies as the GBP, U.S. dollar and euro did not experience such a situation. While internationalizations of these currencies were being realized, the liberation levels of their financial markets, financial systems and financial trades were all higher than current levels of China.

Li said that China's current money stock ranks first in the world, and according to a rough calculation, China's current money stock is between 14 trillion and 15 trillion U.S. dollars. If the capital account opening-up course is not properly controlled, it will probably lead to a situation of the yuan being exchanged into foreign currencies and “going global.”

This course and the course of the U.S. dollar and euro being exchanged into the yuan and flowing into China take place simultaneously. The problem is that we do not know which course is more powerful. Therefore, the yuan internationalization is very complicated.

“I do not think there is a person in the world who clearly understands this issue. All we can do is to take one step and look around before taking another,” said Li.

“The yuan internationalization should be an outcome but not a necessary condition of China's sustained economic opening-up and financial system reform. The logic relation must be made clear,” he said.

Li expressed that the yuan internationalization will be promoted in for a period in the future but not in a shock therapy or explosive way. It will be a gradual, practical, cautious and relatively long course and probably will take 10 or 20 years.

But this course will be a good thing without doubt for the global economic stability. However, if the yuan internationalization is promoted too rapidly, it will not be beneficial for global financial and monetary systems and will bring many unnecessary turbulent factors to the global economy.

Read the Chinese version at: 人民币国际化不是“大爆炸式改革”, Source: People's Daily Online, Author: Tan Shusen

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