Informal Talk with Gregory Chin at MERICS on February 5th, 2015
Gregory Chin, Associate Professor at York University (Canada) and former Canadian diplomat is a leading expert on Chinas role in the international financial system. Drawing on his extensive research he shared his insights into the process of China’s currency internationalisation.
Chin outlined two major inflection points in the internationalisation of the renminbi: The establishment of Hong Kong as an offshore centre in 2003 and the global financial crisis in 2008 that made China’s policy-makers aware of the dangers of the country’s reliance on the dollar.
Initially the process of renminbi internationalisation was a “story between Beijing and Hong Kong.” It was only against the backdrop of the global financial crisis that China began to promote the renminbi’s use in other regions. To support the renminbi’s use in international trade, China facilitated the development of renminbi offshore centres – at first in the Asian region and later all over the world.
In addition to increasing offshore liquidity, these centres serve to “build bridges between offshore and onshore banking.” Chin suggested that the largest potential for renminbi internationalisation lies in Latin America and Africa where the renminbi could evolve into a significant third party currency.
Chin argued that the correct timing of further integration steps is highly challenging and that it remains unclear whether the current conditions in the global economy are conducive to the renminbi’s internationalisation. However, Chin suggested that a strong US dollar could in fact support the renminbi’s global rise. Despite the uncertainties surrounding the future of China’s currency, Chin considers it highly likely that the global monetary system will develop towards a multicurrency system with the US dollar, Euro, British Pound, Yen and RMB as the five leading currencies.