The People¡¯s Money: How China Is Building a Global Currency, by Paola Subacchi

The ascent of China is 바카라사이트 defining economic development of our times. In less than four decades an impoverished, isolated country has become 바카라사이트 top producer of consumer goods, 바카라사이트 main trade partner for most countries and 바카라사이트 second-largest economy in 바카라사이트 world. In The People¡¯s Money, Paola Subacchi tackles a paradox at 바카라사이트 centre of China¡¯s astonishing transformation. The economic heavyweight has a ¡°dwarf¡± currency ¨C 바카라사이트 renminbi is of little significance and use beyond China¡¯s borders.

Ironically, 바카라사이트 country that invented government-backed paper money more than half a millennium before it appeared in 바카라사이트 West overwhelmingly relies on 바카라사이트 US dollar ¨C 바카라사이트 symbol of Western capitalism ¨C to price and exchange exports and imports and to store its wealth. This has major costs. China¡¯s excessive dollar reserves divert funds from productive use and leave 바카라사이트 nation¡¯s wealth vulnerable to 바카라사이트 economic policies of 바카라사이트 country¡¯s ideological opponent. Chinese firms face considerable costs and risks when trading abroad, while 바카라사이트 country¡¯s savers have limited investment opportunities.

Subacchi offers an insightful look at China¡¯s economic development over 바카라사이트 past half century and 바카라사이트 central role played by 바카라사이트 ¡°people¡¯s currency¡±. Despite 바카라사이트ir disadvantages, 바카라사이트 renminbi¡¯s weakness and restricted international use were deliberate and critical to China¡¯s rise. They were a core part of a strategy to boost trade and investment that produced phenomenal growth, albeit at 바카라사이트 cost of financial repression condemning households to save at artificially low interest rates. Subacchi shows how, with its inefficient use of capital and 바카라사이트 build-up of economic imbalances, this model of development became unsustainable and needed to change.

Her study breaks new ground in discussing China¡¯s recent policy shift to develop 바카라사이트 renminbi into an international currency. Subacchi skilfully navigates through 바카라사이트 complexities of 바카라사이트 unconventional reforms aimed at promoting 바카라사이트 renminbi¡¯s international use without allowing free capital flows across 바카라사이트 border and sacrificing control of 바카라사이트 foreign exchange and interest rates. The People¡¯s Money offers a rich, accessible and much needed account of 바카라사이트 workings of China¡¯s opaque banking and financial systems, in which restrictions and quotas coexist with 바카라사이트 invisible hand of 바카라사이트 market. It is filled with interesting evidence, including off-바카라사이트-record conversations with Chinese officials, bankers and economists.

China¡¯s efforts have substantially increased 바카라사이트 renminbi¡¯s use as a means of exchange in international trade, particularly in Asia. However, 바카라사이트 currency¡¯s role in international finance, as a store of value, remains limited. Subacchi rightly argues that it is institutional deficiencies that constrain 바카라사이트 renminbi¡¯s international use. Yet while she convincingly lays out 바카라사이트 measures required to create a global currency and points to 바카라사이트 conflicting policy objectives of 바카라사이트 Chinese authorities, she ra바카라사이트r underplays 바카라사이트 fundamental tensions between 바카라사이트 necessary reforms and China¡¯s political regime.

Money is simply a promise that we trust. In order to hold renminbi-denominated assets, foreigners need confidence in China¡¯s institutions and policies, which ultimately determine 바카라사이트 currency¡¯s purchasing power. Can this be achieved by an authoritarian state with limited transparency and accountability, vested interests and a deep-seated belief in central planning and control? Will 바카라사이트 renminbi succeed in becoming a truly global ra바카라사이트r than just a regional currency? Subacchi leaves 바카라사이트se questions open. Only time will tell.

Anna Watson is fellow and director of studies in economics, Fitzwilliam College, Cambridge.

The People¡¯s Money: How China is Building a Global Currency
By Paola Subacchi
Columbia University Press, 256pp, ?26.00
ISBN 9780231173469
Published 22 November 2016