Page 70 - 2017 White Paper
P. 70
7 White Paper on the Business Environment in China
across Central Asia, the Middle East and Europe. The sea- also known as remninbi or “the people’s money” joined
based Maritime Silk Road goes through Guangdong and the basket of currencies comprising the IMF’s Special
Hainan en route to the Malacca Strait and Indian Ocean, Drawing Right or SDR, which includes the U.S. dollar,
traversing the Horn of Africa before entering the Red Sea the euro, the Japanese yen and the British pound. The
and Mediterranean. Both roads end up in Venice (Shi and event was hailed by Chinese media and the People’s
Yang 2014). Bank of China, the country’s central bank, as a milestone
occasion of momentous significance, a powerful symbol
Guangdong in early November 2014 already hosted of its newly emerging economic muscle and a clear
the inaugural international expo for the maritime Silk signal of its serious intent to continue with ongoing
Road, with 42 countries participating (Shi and Yang economic reform.
2014).
According to Reuters, China’s central bank said in a
President Xi has also already ramped up efforts to statement: “The inclusion into the SDR is a milestone
sell his new strategy overseas. One month after his in the internationalization of the renminbi, and is
Kazakhstan speech, when addressing the Indonesian an affirmation of the success of China’s economic
parliament in Jakarta, he pitched “the 21st Century development and results of the reform and opening up
Maritime Silk Road”. During state visits in 2014, he of the financial sector.” The central bank added that the
secured verbal commitments from three countries along yuan’s SDR inclusion aligned with the country’s overall
the routes -- Tajikistan, the Maldives and Sri Lanka, while direction to “deepen economic reforms” and opening up
both India and Afghanistan have reportedly expressed to “promote global growth” (Reuters 2016).
interest (Shi and Yang 2014).
Zhang Tao, deputy managing director for the IMF,
The president has not hesitated to back up the opined that the inclusion had significant impact not
plan with the appropriate funding – as of November only to China but to the rest of the world as well.
2014, media reports announced that China is planning Speaking at the Peterson Institute for International
a US$16.3 billion fund to finance construction of Economics and China Finance 40 Forum in Washington,
infrastructure linking its markets to three continents D.C., Xinhua reports, he said: “The inclusion of the
along the New Silk Road route (Shi and Yang 2014). He Renminbi thus recognizes a significant increase in
also allocated US$50 billion in October to establish an the internationalization of the Chinese renminbi in
Asian Infrastructure Investment Bank to lend money to recent years, underpinned by policy reforms to achieve
build roads, railways and other transport links in poorer China’s transition to an increasingly open and market-
parts of Asia (The Economist 2014). based economy.” Mr. Zhang echoed the central bank’s
sentiments on the implications of the SDR inclusion
Experts expound on the New Silk Road plan’s on China’s reforms, adding that this development
significance, that this could mean “a shift in China’s would “help consolidate the process of renminbi
strategic thought”, says Zhang Yunling, director of the internationalization” and “strongly support China’s
Institute of Asia-Pacific Studies at the Chinese Academy continued efforts to reform its monetary, foreign
of Social Sciences. To Bloomberg, Mr. Zhang added exchange, and financial systems” (Xinhua 2016c).
that: “The past three decades of China’s development
have been focused on ‘absorbing foreign investment’ Some skeptical observers of Beijing’s often inscrutable
and the next step will be about the outflow of Chinese foreign exchange economic policy, however, were not so
development to its neighbors” (Shi and Yang 2014). easily convinced.
Yuan Inclusion in IMF’s SDR After the October 1st announcement, Fortune
reported U.S. Treasury Secretary Jack Lew as saying
Progress Report the yuan was “quite a ways” from true global reserve
currency status. He acknowledged the “enormous”
change in China in the last 10 years in implementing
On October 1st, 2016, the same day that the policies to make the yuan more open, but added that
Communist Party celebrated anniversary of the founding Beijing “still had work to do to make its currency and its
of the People’s Republic of China, its currency, the yuan, economy more market-driven”. Secretary Lew said: “Being
70
across Central Asia, the Middle East and Europe. The sea- also known as remninbi or “the people’s money” joined
based Maritime Silk Road goes through Guangdong and the basket of currencies comprising the IMF’s Special
Hainan en route to the Malacca Strait and Indian Ocean, Drawing Right or SDR, which includes the U.S. dollar,
traversing the Horn of Africa before entering the Red Sea the euro, the Japanese yen and the British pound. The
and Mediterranean. Both roads end up in Venice (Shi and event was hailed by Chinese media and the People’s
Yang 2014). Bank of China, the country’s central bank, as a milestone
occasion of momentous significance, a powerful symbol
Guangdong in early November 2014 already hosted of its newly emerging economic muscle and a clear
the inaugural international expo for the maritime Silk signal of its serious intent to continue with ongoing
Road, with 42 countries participating (Shi and Yang economic reform.
2014).
According to Reuters, China’s central bank said in a
President Xi has also already ramped up efforts to statement: “The inclusion into the SDR is a milestone
sell his new strategy overseas. One month after his in the internationalization of the renminbi, and is
Kazakhstan speech, when addressing the Indonesian an affirmation of the success of China’s economic
parliament in Jakarta, he pitched “the 21st Century development and results of the reform and opening up
Maritime Silk Road”. During state visits in 2014, he of the financial sector.” The central bank added that the
secured verbal commitments from three countries along yuan’s SDR inclusion aligned with the country’s overall
the routes -- Tajikistan, the Maldives and Sri Lanka, while direction to “deepen economic reforms” and opening up
both India and Afghanistan have reportedly expressed to “promote global growth” (Reuters 2016).
interest (Shi and Yang 2014).
Zhang Tao, deputy managing director for the IMF,
The president has not hesitated to back up the opined that the inclusion had significant impact not
plan with the appropriate funding – as of November only to China but to the rest of the world as well.
2014, media reports announced that China is planning Speaking at the Peterson Institute for International
a US$16.3 billion fund to finance construction of Economics and China Finance 40 Forum in Washington,
infrastructure linking its markets to three continents D.C., Xinhua reports, he said: “The inclusion of the
along the New Silk Road route (Shi and Yang 2014). He Renminbi thus recognizes a significant increase in
also allocated US$50 billion in October to establish an the internationalization of the Chinese renminbi in
Asian Infrastructure Investment Bank to lend money to recent years, underpinned by policy reforms to achieve
build roads, railways and other transport links in poorer China’s transition to an increasingly open and market-
parts of Asia (The Economist 2014). based economy.” Mr. Zhang echoed the central bank’s
sentiments on the implications of the SDR inclusion
Experts expound on the New Silk Road plan’s on China’s reforms, adding that this development
significance, that this could mean “a shift in China’s would “help consolidate the process of renminbi
strategic thought”, says Zhang Yunling, director of the internationalization” and “strongly support China’s
Institute of Asia-Pacific Studies at the Chinese Academy continued efforts to reform its monetary, foreign
of Social Sciences. To Bloomberg, Mr. Zhang added exchange, and financial systems” (Xinhua 2016c).
that: “The past three decades of China’s development
have been focused on ‘absorbing foreign investment’ Some skeptical observers of Beijing’s often inscrutable
and the next step will be about the outflow of Chinese foreign exchange economic policy, however, were not so
development to its neighbors” (Shi and Yang 2014). easily convinced.
Yuan Inclusion in IMF’s SDR After the October 1st announcement, Fortune
reported U.S. Treasury Secretary Jack Lew as saying
Progress Report the yuan was “quite a ways” from true global reserve
currency status. He acknowledged the “enormous”
change in China in the last 10 years in implementing
On October 1st, 2016, the same day that the policies to make the yuan more open, but added that
Communist Party celebrated anniversary of the founding Beijing “still had work to do to make its currency and its
of the People’s Republic of China, its currency, the yuan, economy more market-driven”. Secretary Lew said: “Being
70
