Professors Susan Shirk and Victor Shih on the Internationalization of the RMB
To Renminbi Or Not to Renminbi?
10/22/2012
Susan Shirk and Victor Shih,
Foreign Policy
As China moves up the economic pecking order, it has been trying to promote its currency, the renminbi (RMB), as an alternative to the U.S. dollar. The Chinese government has ambitious plans for establishing offshore centers where companies can raise RMB funds, internationalizing its currency, and possibly enabling the RMB to supplant the dollar as the global reserve currency. The U.S. dollar isn't the only global reserve currency -- countries also keep some of their foreign exchange reserves in euros and yen -- but it has been the dominant one since the 1944 Bretton Woods conference.
During Tuesday night's presidential debate, Republican nominee Mitt Romney repeated his promise to label China a "currency manipulator" on his first day in office. The heated rhetoric on China in the debate, and throughout the campaign, over which candidate would be tougher on China's currency manipulation and other unfair trade practices reflects Americans' anxieties about the relative standing of the U.S. and Chinese economies, and it suggests that a shift to the RMB would resonate deeply in U.S. domestic politics. However, despite the bluster, the dollar will remain dominant.
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Susan Shirk is the chair of the 21st Century China Program and Ho Miu Lam Professor of China and Pacific Relations at the School of International Relations and Pacific Studies (IR/PS) at UC San Diego. She also is director emeritus of the University of California system-wide Institute on Global Conflict and Cooperation (IGCC) and chair of the IGCC International Advisory Board.
In 1993, she founded, and continues to lead, the Northeast Asia Cooperation Dialogue (NEACD), an unofficial “track-two” forum for discussions of security issues among defense and foreign ministry officials and academics from the United States, Japan, China, Russia, and the Koreas.
Victor C. Shih received his doctorate in government from Harvard University, where he researched banking sector reform in China. He is the author of Factions and Finance in China: Elite Conflict and Inflation, which is about the linkages between elite politics and banking policies in China. He is also the author of numerous journal articles appearing in American Political Science Review, The China Quarterly, Comparative Political Studies, Journal of Politics, The Wall Street Journal, and The China Business Review (among others), and a frequent adviser on the banking industry in China. Shih is currently engaged in a study of how the coalition formation strategies of the founding leaders had a profound impact on the evolution of the Chinese Communist Party.