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China and the SDR: Financial Liberalization through the Back Door

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  • Barry Eichengreen

    (Department of Economics, University of California, Berkeley, 603 Evans Hall, Berkeley, California 94720-3880, USA)

  • Guangtao Xia

    (PBC School of Finance, Tsinghua University, 43 Chenfu Road, Haidian District, Beijing 100083, China)

Abstract

We analyze the motives for China’s campaign to secure the addition of its currency, the renminbi, to the basket of currencies comprising the International Monetary Fund’s Special Drawing Rights. Our argument is that the campaign to add the renminbi to the SDR basket was not just a vanity project; it was a strategy used by the advocates of financial liberalization in China to force the pace of reform. It was also a strategy with significant risks.

Suggested Citation

  • Barry Eichengreen & Guangtao Xia, 2019. "China and the SDR: Financial Liberalization through the Back Door," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-36, September.
    • Handle: RePEc:wsi:qjfxxx:v:09:y:2019:i:03:n:s2010139219500071
    DOI: 10.1142/S2010139219500071
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    References listed on IDEAS

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    1. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
    2. García-Herrero, Alicia & Gavilá, Sergio & Santabárbara, Daniel, 2009. "What explains the low profitability of Chinese banks?," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2080-2092, November.
    3. Peter B. Kenen, 2010. "The Substitution Account as a First Step Toward Reform of the International Monetary System," Policy Briefs PB10-6, Peterson Institute for International Economics.
    4. Andrés Fernández & Michael W Klein & Alessandro Rebucci & Martin Schindler & Martín Uribe, 2016. "Capital Control Measures: A New Dataset," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 548-574, August.
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    Cited by:

    1. Feng, Ling & Le, Duong Thuy & Yuan, Fan, 2023. "Inclusion of the RMB in SDRs and the impossible trinity in China," Economic Systems, Elsevier, vol. 47(2).
    2. Cesa-Bianchi, Ambrogio & Eguren-Martin, Fernando, 2021. "Dash for dollars," Bank of England working papers 932, Bank of England.
    3. Barry Eichengreen, 2024. "International Finance and Geopolitics," Asian Economic Policy Review, Japan Center for Economic Research, vol. 19(1), pages 84-100, January.
    4. Herman Mark Schwartz, 2022. "The European Union, the United States, and Trade: Metaphorical Climate Change, Not Bad Weather," Politics and Governance, Cogitatio Press, vol. 10(2), pages 186-197.
    5. Eswar Prasad, 2023. "Has China's Growth Gone from Miracle to Malady?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 54(1 (Spring), pages 243-270.

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