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Case
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Reference no. 121-0010-1
Authors:
Published by:
ESSEC Business School (2021)
Length:
21 pages
Data source:
Published sources

Abstract

China has undergone a large economic transformation in the latest decades, becoming one of the world's fastest-growing economies. Such transformation has been dubbed by the World Bank as 'the fastest sustained expansion by a major economy in history'. Despite being a global trade power, the international importance of the renminbi has lagged behind. The Chinese authorities have announced on several occasions the goal of internationalising the renminbi, but its actions have fallen short, being a slow process going backwards and forwards many times. It was only after 2008 that the Chinese authorities took effective measures to increase the use of its currency in conducting international transactions and reduce the dependency on the US dollar. The case study outlines the efforts to promote the overseas use of the renminbi and its growing status as an international currency. Students can learn what an international currency is, the benefits and risks of internationalising a currency and the different types of capital flows and capital controls. As an introduction to China's exchange rate policy, students should read the ESSEC case study 'The Renminbi's Long March' that outlines progress on the renminbi exchange rate policy.

Topics

Capital account convertibility; Capital controls; Capital flows; China; Capital mobility; Current account; Exchange rate; Foreign direct investment; Hot money; International currency; International finance; Renminbi; Reserve currency; Trade finance; Yuan

Setting

The events covered by this item took place in 1978-2020.

Geographical setting

Region:
Asia
Country:
China

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