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The People’s Republic of China’s Financial Markets : Are They Deep and Liquid Enough for Renminbi Internationalization?

Author

Listed:
  • Prince Christian Cruz

    (Asian Development Bank Institute (ADBI))

  • Yuning Gao
  • Lei Lei Song

Abstract

Domestic financial market development is a key determinant of a currency’s international status, and financial depth and market liquidity are two essential attributes for an international currency. This paper discusses the status of the People’s Republic of China’s (PRC) financial markets and their depth and liquidity conditions. The paper also compares the PRC’s financial markets with those in developed and emerging economies, contemporaneously and historically. The paper finds that the PRC’s financial markets are not as deep and liquid as those in developed economies, and are much less so than those with international currencies. To support the internationalization of the renminbi, the PRC needs to remove several major obstacles to deepen its financial markets and improve their liquidity conditions.

Suggested Citation

  • Prince Christian Cruz & Yuning Gao & Lei Lei Song, 2014. "The People’s Republic of China’s Financial Markets : Are They Deep and Liquid Enough for Renminbi Internationalization?," Finance Working Papers 24160, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:24160
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    Cited by:

    1. Ming Zhang & Bin Zhang, 2017. "The Boom and Bust of the RMB's Internationalization: A Perspective from Cross-Border Arbitrage," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(2), pages 237-253, July.

    More about this item

    Keywords

    financial market; financial development; financial depth; market liquidity; Currency Internationalization;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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