Comments by Anwar Nasution, on The Economics of RMB Internationalization

Abstract

Anwar Nasution: It is my pleasure to comment on this excellent paper on the important topic of analyzing the People’s Republic of China’s (PRC) reforms over the past decade to move toward internationalizing the Renminbi (RMB). The RMB is beginning to be used as an international medium of exchange in dominating and setting cross-border trade and financial transactions. The paper summarizes the benefits and costs of RMB internationalization from a theoretical point of view. There are also econometric studies on the impacts of RMB internationalization on financial development in the PRC and the estimate of seigniorage revenue of RMB, but there is no estimate on the inflationary tax enjoyed by the PRC from foreign holdings of its currency. In addition, internationalization of the RMB allows the PRC to borrow from the international community with liabilities denominated in that currency without exchange rate risk. Unfortunately, there are no brief summaries of PRC government policies on how to make the RMB become an international unit of account, medium of exchange, and store of value. Also there is no information provided in the paper on the size of capital markets in the PRC: the structural financial system, the size of public sector debt and security market, and their liquidity.