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762. The Renminbi Bloc Is Here: Asia Down, Rest of the World to Go?
- Author:
- Arvind Subramanian and Martin Kessler
- Publication Date:
- 10-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- A country's rise to economic dominance tends to be accompanied by its currency becoming a reference point, with other currencies tracking it implicitly or explicitly. For a sample comprising emerging market economies, we show that in the last two years, the renminbi has increasingly become a reference currency which we define as one which exhibits a high degree of co-movement (CMC) with other currencies. In East Asia, there is already a renminbi bloc, because the renminbi has become the dominant reference currency, eclipsing the dollar, which is a historic development. In this region, 7 currencies out of 10 co-move more closely with the renminbi than with the dollar, with the average value of the CMC relative to the renminbi being 40 percent greater than that for the dollar. We find that co-movements with a reference currency, especially for the renminbi, are associated with trade integration. We draw some lessons for the prospects for the renminbi bloc to move beyond Asia based on a comparison of the renminbi's situation today and that of the Japanese yen in the early 1990s. If trade were the sole driver, a more global renminbi bloc could emerge by the mid-2030s but complementary reforms of the financial and external sector could considerably expedite the process.
- Topic:
- Development, Economics, Emerging Markets, Foreign Exchange, and Monetary Policy
- Political Geography:
- China and Asia
763. Choice and Coercion in East Asian Exchange Rate Regimes
- Author:
- C. Randall Henning
- Publication Date:
- 09-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper examines the exchange rate regimes of East Asian countries since the initial shift by China to a controlled appreciation in July 2005, testing econometrically the weights of key currencies in the implicit baskets that appear to be targeted by East Asian monetary authorities. It finds, first, that Malaysia, Thailand, Singapore and the Philippines have formed a loose but effective “renminbi bloc” with China, and that South Korea has participated tentatively since the global financial crisis. Second, the emergence of the renminbi bloc in terms of the exchange rate has been facilitated by the continued dominance of the US dollar as a trade, investment, and reserve currency. Third, exchange rate stabilization is explained by the economic strategies of these countries, which rely heavily on export development and financial repression, and the economic rise of China. Fourth, analysts should specify the exchange rate preferences of these emerging market countries carefully before drawing inferences about Chinese influence within the region.
- Topic:
- Development, Emerging Markets, Foreign Exchange, and International Trade and Finance
- Political Geography:
- China, Malaysia, Asia, South Korea, Philippines, Singapore, and Thailand
764. Capital Account Policies and the Real Exchange Rate
- Author:
- Olivier Jeanne
- Publication Date:
- 09-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper presents a simple model of how a small open economy can undervalue its real exchange rate using its capital account policies. The paper presents several properties of such policies, and proposes a rule of thumb to assess their welfare cost. The model is applied to an analysis of Chinese capital account policies.
- Topic:
- Development, Economics, Emerging Markets, and Monetary Policy
- Political Geography:
- China
765. Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration
- Author:
- Stephan Haggard and Marcus Noland
- Publication Date:
- 05-2012
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
- Topic:
- Foreign Policy, Economics, International Trade and Finance, and Bilateral Relations
- Political Geography:
- China, Israel, and North Korea
766. Untying the land knot: Turning investment challenges into opportunities for all citizens
- Author:
- Xiaofang Shen
- Publication Date:
- 11-2012
- Content Type:
- Working Paper
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- China, 1980s. Newly embarked on its economic transformation, China opened to foreign direct investment (FDI) to obtain capital, technology and access to world markets. Investors hesitated, however, since national law prohibited access to state-owned land. In reaction, the government introduced a long-term lease system, first tested in special economic zones and later applied across the country. This approach enabled China's phenomenal success in attracting FDI in the years to come; it also paved the way for 500 million urban citizens to gain property rights, which in turn inspired the rural population to ask for the same rights today.
- Topic:
- Development, Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- China
767. China Reinterprets the Liberal Peace
- Author:
- Silvia Menegazzi
- Publication Date:
- 12-2012
- Content Type:
- Working Paper
- Institution:
- Istituto Affari Internazionali
- Abstract:
- China's assertiveness is growing. While in the past China's foreign policy kept a low profile in international affairs, global developments, prime amongst which in the Middle East, highlight China's growing influence in world politics and its ensuing role in shaping global norms. Within the liberal peace discourse, China's reinterpretation of international norms can be seen as the result of a mixture of prior local norms - sovereignty and non-interference - and changes within the international environment - namely conflicts in North Africa and the Middle East. Particularly, in terms of intervention and peace-building practices, China insists that a number of preconditions - which are encapsulated in the notion of Responsible Protection (RP) - have to be met in order to consider intervention in sovereign states. This paper argues that in order to achieve a full picture of Chinese foreign policy and its normative underpinnings, it is necessary to explore the debate within non-state actors beyond the government apparatus, such as think tanks and research institutions.
- Topic:
- Foreign Policy, Emerging Markets, International Affairs, and Foreign Direct Investment
- Political Geography:
- China, Middle East, Libya, North Africa, and Syria
768. China's regional security relations and interaction with the U.S.: trends, challenges and possible scenarios
- Author:
- Frans-Paul van der Putten
- Publication Date:
- 12-2012
- Content Type:
- Working Paper
- Institution:
- Norwegian Centre for Conflict Resolution
- Abstract:
- This paper provides a brief overview of current developments relevant to Sino-U.S. security relations, and to China's involvement in regional security issues, in East and South-East Asia. The most fundamental challenge with regard to regional stability is how the roles of China and the United States in the Asia Pacific can be reconciled. While the U.S. is concerned that a rising China will eventually push American influence out of East and South-East Asia, China in turn fears that the U.S. will try to retain its leadership role by exploiting and amplifying tensions between the Chinese and their neighbours. Currently the Sino-U.S. rivalry is threatening unity within ASEAN, which poses an immediate risk for regional stability. A substantial improvement in regional stability – whether in South-East or in East Asia – is unlikely unless the U.S. and China manage to stabilise their bilateral relationship. It is important for all interested parties, inside Asia but also outside (including in Europe), to contribute to a move away from a scenario in which regional stability continues to deteriorate, and in the direction of a scenario that involves a cooperative arrangement between China and the U.S. in a stable multilateral setting.
- Topic:
- Foreign Policy, Arms Control and Proliferation, International Trade and Finance, Bilateral Relations, and Hegemony
- Political Geography:
- United States, China, Israel, East Asia, Australia/Pacific, and Southeast Asia
769. Russia, China and Global Governance
- Author:
- Charles Grant
- Publication Date:
- 02-2012
- Content Type:
- Working Paper
- Institution:
- Carnegie Endowment for International Peace
- Abstract:
- The need for international co-operation has never been greater, yet global governance is inadequate. Whether one looks at the Doha round of trade liberalisation, the climate change talks led by the United Nations, the G20's efforts to co-ordinate economic and financial policies, or efforts to reform the UN Security Council (UNSC), not much is being achieved. 'Multilateralism'–the system of international institutions and rules intended to promote the common good–appears to be weakening. At the same time, the growing influence of China, Russia and other non-Western powers is pushing the international order towards 'multipolarity'.
- Topic:
- Defense Policy, Diplomacy, Governance, and Reform
- Political Geography:
- Russia, China, and Asia
770. True Partners? How Russia and China See Each Other
- Author:
- Dmitri V. Trenin
- Publication Date:
- 02-2012
- Content Type:
- Working Paper
- Institution:
- Carnegie Endowment for International Peace
- Abstract:
- This report compares Russian and Chinese security perceptions and explains how they shape the two countries' policies towards each other. It argues that the modern relationship between the two countries, formed in the late 19th and 20th centuries, was turned on its head at the start of the 21st century. China has now become a powerful factor affecting a whole range of Russian policies, both domestic and foreign. The paper also argues that, while Russia is not central to China's foreign relations, and non-existent in China's domestic politics, good relations with Moscow are an important supporting element in Beijing's overall strategy of reclaiming China's 'rightful place in the world'. It concludes that while both countries need each other and would benefit from a stable political relationship and close economic ties, both Moscow and Beijing lack the long-term strategies to create such a bond.
- Topic:
- International Relations, Foreign Policy, and Bilateral Relations
- Political Geography:
- Russia, China, and Asia