Frankfurt am Main, December 15, 2015
On Tuesday, December 15, 2015, Frankfurt School of Finance & Management and MERICS hosted a discussion on the international role of the renminbi and the deregulation of China’s financial system. More than 80 guests came to listen to the controversial keynote statements of Professor Dr Horst Löchel, Professor of Economics at Frankfurt School, and Dr Sandra Heep, Head of the Economic Policy and Financial System Programme at MERICS.
Professor Dr Udo Steffens, president of Frankfurt School, welcomed the guests and introduced Dr Sandra Heep, Professor Dr Horst Löchel and James Shotter, Frankfurt Finance Correspondent at Financial Times. He also thanked MERICS for sponsoring the event.
In her keynote statement Dr Sandra Heep introduced three problems that China faces in regards to establishing the renminbi as an international currency. “The first challenge will be to establish a new growth model as the old one has run out of steam”, she explained. Another issue, according to Dr Sandra Heep, is that better access will be needed to establish the renminbi as an international reserve currency.
This will not be possible without financial liberalisation, a topic highly contested within the communist party. A lack of trust of foreign investors in the political and economic system of China is the third hurdle. Overall, Dr Sandra Heep saw a lot of work ahead for policy makers in China trying to establish the renminbi as a global currency and no guarantee for success.
“Yes, yes, yes, yes”, was Professor Dr Horst Löchel's answer to the question, whether the renminbi is set to become a global currency. In contrast to Dr Sandra Heep, he thought it inevitable that the renminbi will succeed on its path to an international currency. According to him, it is rather a question of “when” than a question of “if”. Even though China’s way of liberalisation will be different from the West, its market will become more and more open. Professor Löchel also saw the internationalisation of the renminbi as part of China’s strategy – to be an important global power. He also predicted that by the year 2020 ten percent of the world’s reserves will be in renminbi.
Professor Löchel’s statement was followed by a discussion with the audience moderated by James Shotter. Questions ranged from the Chinese way of liberalisation by staying in the driving seat and the stock market crash in summer 2015 to what it will mean for the Western world if the renminbi will indeed become a global currency.
After the discussion MERICS invited all guests to a reception to continue the discussion on a personal level.