The Role of the Renminbi in the International Monetary System

The current international monetary system has critical defects. An effective reform of the system calls for a new international currency, for which the Renminbi may be a promising candidate. Despite the rapid growth of the Chinese economy, certain prerequisites have to be satisfied before the Renminbi can be internationalized. China needs to ensure full convertibility of the Renminbi and further develop its financial markets to facilitate the process of internationalization.

This course will discuss various aspects of the Renminbi internationalization. Specifically, innovative suggestions will be provided on topics including the reform of the international monetary system, the opportunities and challenges of the Renminbi internationalization, and the evolution of China’s monetary and exchange rate policies. Since the internationalization of Renminbi is important to the future of Hong Kong as an international financial center, the lectures will also discuss the possible implications of this process for Hong Kong.

Week 1: The Role of the Renminbi in the International Monetary System

The lecture will commence with a review on the roles of money in the domestic and international monetary systems. Upon analyzing the critical defects of the international monetary system and the necessity of reform, we will discuss the global governance and institutional reform of the international monetary system. An assessment on the costs and benefits associated with the internationalization of the Renminbi for the system will conclude the lecture.

Week 2: Internationalization of the Renminbi and Renminbi Offshore Markets

This lecture will address the following questions: What are the aims of internationalizing the Renminbi? What analytical framework can we adopt to draft proposals on the possible process of Renminbi internationalization? For China, what are the costs and benefits of establishing Renminbi offshore markets? How can the risks to monetary and financial stability be managed prudently? What are the implications for other areas, particularly Hong Kong?

Week 3: The Monetary and Exchange Rate Policy of China

The lecture will begin with an analysis on the approaches, instruments, and intermediate targets of China’s monetary policy. The legal framework of monetary regulation, the role of the central bank, and the objective of monetary policies will then be elaborated, followed by a brief discussion on the interest rate and exchange rate liberalization. The lecture will then proceed to review the monetary policy stance of the People’s Bank of China over the years and discuss the recent experience of monetary policymaking in China.

Week 4: The Future of Hong Kong’s Monetary System

This lecture will focus on the monetary system of Hong Kong. We will review the history of Hong Kong’s monetary policy and monetary control, thus revealing how the monetary system of Hong Kong has been designed to serve the public interest most effectively and maintain Hong Kong as an international financial center. The lecture will conclude with a discussion on the future of the Linked Exchange Rate System, which has served Hong Kong well for almost 30 years.