China’s Entrance Into SDR Basket Shifts Global Finance

Remember the renminbi billboard sighting in China back in March of 2015? Well, it has officially landed.

On Monday, October 3rd, 2016, a turning point for America begins: The beginning of the end for the global U.S. Dollar hegemony.

 

China’s yuan, or Renminbi (RMB), will officially join the International Monetary Fund (IMF)’s Special Drawing Rights (SDR) basket on Saturday, which indicates a step up in the international status of the currency.

• The inclusion is first and foremost recognition of the substantial reform efforts conducted by Chinese monetary authorities.
• “The RMB is already, for a number of years, very much an international currency.
• China has also taken additional measures to allow the inclusion of RMBinto the SDR,” said Jurgen Conrad, head of the Economics Unit at the Asian Development Bank in China.
• Alfred Schipke, the chief China representative of the IMF, thinks that the move’s significance isn’t limited only to the country.
• “[I think] the RMB joining the SDR will indeed be a milestone for China, but also for the international financial system. It, in effect, recognizes the progress that has been made on the reform side in China over the past couple of years,” said Schipke.

The world economic crisis

We are on the threshold of a new economics that would form the basis of a new public policy quite different from the one that was followed within the neo-classical paradigm that has held sway over the last six decades. Here I examine briefly the origins and nature of the latest crisis in the world capitalist economy and its implications for economic theory.

In the process of its growth, the world economy has undergone a structural change in the post-war period in terms of two important features. First, the multinational corporations that emerged in this period not only sold goods and services on a global scale but were able to achieve internationalisation in their production processes such that different components of a particular good could be manufactured in their facilities in different countries to take advantage of country specific resource endowments. This laid the basis of an unprecedented growth in productivity, and profits. Given the problem of investing these profits within the sphere of production, due to demand constraints, profits from the sphere of production began to flow into the financial sphere.

China Launches Yuan-Based International Payment System

MOSCOW (Sputnik) – China launched the first phase of its China International Payment System (CIPS) in Shanghai on Thursday, allowing cross-border transactions in the Chinese national currency, the yuan.

CIPS’ first phase provides clearing and settlement services, according to the People’s Bank of China announcement. Its launch is said to remove hurdles to the yuan’s internationalization by reducing transaction costs and processing times.

Replace dollar with super currency: economist

The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. “The solution to this is to replace the national currency with a global currency.”

Renminbi rising: China’s ‘de-Americanized world’ taking shape?

China’s leadership will soon usher in bold reforms to support a domestic consumption-driven economic model, and globalizing the renminbi as an alternative store of wealth to the US dollar is at the center of the strategy.

The scathing commentary published by China’s state-owned Xinhua news agency calling for a ‘de-Americanized world’ was undoubtedly music to the ears of many in the developing world. The article – published during the recent fiscal deadlock – accused Washington of abusing its superpower status by engaging in unwarranted military conflicts, engineering regime changes with impunity, and mishandling its status as the issuer of the world reserve currency by exporting risk abroad. Xinhua’s commentary also called for drastic reforms of the IMF and World Bank to reflect the growing muscle of the developing world, and most significantly, “the introduction of a new international reserve currency that is to be created to replace the dominant US dollar.” 

China’s Big Currency Strategy

China’s growing success in internationalizing the RMB has both political and economic implications.

A Bank of International Settlements survey released on September 5 reveals that the renminbi (RMB) is now among the 10 most actively traded currencies in the world. This comes on the back of China’s recent draft plans to allow full convertibility of the RMB within the newly approved Shanghai Free Trade Zone (FTZ). Both events are intricately linked and are linked to deeper plans by the Chinese government to both internationalize the RMB and consolidate its influence and standing in global financial markets. This suggests that China’s global integration is no longer limited to trade, but is fast spilling over into the realm of finance.