Chinese Renminbi Research Articles

Multiple Reserve Currencies and Renminbi Use

We analyze prospects for the Chinese renminbi to become a major international currency, along with the US dollar, in a multiple reserve currency world. Analytical models on switching costs in networks and on currency choice under direct and indirect transaction costs are used to derive variables for empirical analysis. While network size and financial market depth (lower transaction costs) favor incumbents, changes in trade-related bargaining power and in currency volatility could favor newcomers. The models also point to political determinants affecting currency choice. We develop indices to quantify some of these. When the bargaining power index is used in estimation, it shows capital account openness and currency stability have to complement a rise in trade share for an aspiring reserve currency.

Who are the First Users of a Newly-Emerging International Currency? A Demand-Side Study of Chinese Renminbi Internationalization

Who are the first users of a newly-internationalizing currency? This issue, crucial to understanding the dynamics of the emergence of a new international monetary order, remains long underexplored in the existing literature, which tends to adopt a supply-side approach analyzing mainly the international currency issuers. Our study addresses this important question, with a focus on the case of the Chinese renminbi, by employing a demand-side approach examining the international currency users through generalized ordered logistic regression analysis. Our primary argument is that a state hosting a major global financial center—a condition largely independent of influence from countries issuing international currencies—is likely to be more interested in enhancing its use of the renminbi, implying thereby that global financial institutions and the related inter-state rivalries among international currency users may play crucial roles in the shaping of a new international monetary order. We in addition find significant impacts on a state’s interest in renminbi use resulting from its institutional economic cooperation with China through a preferential trade agreement or a bilateral investment treaty, but that a country’s mere trade and investment integration with China does not meaningfully affect its government’s support for renminbi use.

Does news matter in China’s foreign exchange market? Chinese RMB volatility and public information arrivals

This paper examines the impact of public information flows on the volatility of the bilateral Chinese Renminbi–US dollar (RMB–USD) exchange rates in the spot, non-deliverable forward (NDF) and futures markets. By using the comprehensive RavenPack Dow Jones News Analytics database that captures Chinese and US macroeconomic news releases and their sentiment scores at high frequencies, we investigate the circumstances in which public news sentiment is related to the volatility of the above exchange rates. To account for the possibility of different volatility regimes in the RMB–USD volatility, a two-state Regime-Switching EGARCH-in-mean (RS-EGARCH-M) model that incorporates the effects of news sentiment is proposed. Our model suggests that news sentiment has a greater impact on reducing volatility persistence in the low-volatility regime (calm state) for all the NDF and futures exchange rates; in contrast, the impact is greater in the high-volatility regime (turbulent state) for the spot rate. Furthermore, depending on the news sources and sentiment, the marginal effects of news on these exchange rates can vary significantly. In particular, compared with the USD news releases, the RMB news releases have a stronger influence on the RMB–USD volatility. Moreover, the impact of negative news sentiment is greater than that of positive news sentiment. However, the effects of RMB–USD volatility on contemporaneous returns are mostly insignificant. Our RS-EGARCH-M model indicates that the estimated smoothing probability of the RMB–USD spot rate can produce consistent identification of the different economic states arising from changes in the macroeconomic and exchange rate policies of the Chinese government. These findings have important implications for China’s exchange rate regime and the process of RMB internationalization.

Exchange Rate Regime, Financial Market Bubbles and Long‐term Growth in China: Lessons from Japan

AbstractSince 2014, capital inflows into China have turned into capital outflows, reversing the gradual appreciation path of the renminbi against the US dollar into an erratic depreciation path. The paper explains the current capital outflows by comparing China and Japan with respect to the impact of exchange rate expectations on speculative capital flows. It is argued that both in China and Japan, given benign liquidity conditions in the USA, policy‐induced appreciation expectations have generated capital inflows that have contributed to overinvestment and financial market bubbles. The current reversal of capital flows is seen as a signal that the bubble in China has burst. To stabilize growth in China and to discourage speculative capital outflows a fixed exchange rate to the dollar is recommended. Given Japan's experience and given that China's foreign assets remain high, the depreciation pressure on the Chinese renminbi can be expected to abate.

Cost-effectiveness analysis of dapagliflozin versus glimepiride as monotherapy in a Chinese population with type 2 diabetes mellitus

Objective: To evaluate the long-term cost-effectiveness of dapagliflozin (a novel sodium–glucose co-transporter-2 inhibitor) versus glimepiride (a widely used sulfonylurea), when applied as monotherapy in patients with type 2 diabetes mellitus (T2DM) in China.Methods: Literature screening, meta-analysis and indirect comparison were used to compare efficacy and safety between dapagliflozin and glimepiride. Direct medication costs and medical expenditure on treating diabetes related comorbidities were calculated based on published and local sources and reported in 2015 Chinese Renminbi (RMB). A discount rate of 3% was applied to both costs and health effects. The Cardiff model, an economic model designed to evaluate the cost-effectiveness of comparator therapies in diabetes, was used to generate outputs including macrovascular and microvascular complications, diabetes-specific mortality, costs and quality-adjusted life years (QALYs) over a time horizon of 40 years from the health provider perspective. Univariate and probabilistic sensitivity analyses were performed to assess uncertainty in the model results.Results: Compared with glimepiride, patients on dapagliflozin gained 1.01 QALYs, at a cost saving of RMB 49,065 in our simulated cohort. This resulted in a cost saving of RMB 48,585 per QALY gained with dapagliflozin. The cost-effectiveness results were robust to various sensitivity analyses including probabilistic sensitivity analysis (PSA).Conclusions: Compared with glimepiride, dapagliflozin as monotherapy for T2DM is a more cost-effective treatment for T2DM patients on monotherapy in China. The weight control has been identified as the major contributor for the higher cost-effectiveness of dapagliflozin.

Dynamic information spillovers in intraregionally-focused spot and forward currency markets

This paper proposes an intraregionally-focused tri-currency modeling framework to investigate dynamic information spillovers across spot and forward exchange rate markets in frontier and emerging country currencies, for both price levels and volatilities. Empirical estimates of structural parameters were obtained using an MGARCH–MSKST model that incorporated the term structure of non-deliverable forward (NDF) and deliverable forward (DF) markets, the dominance of regional currencies, and the influence of differing forward contract maturities (1-, 3-, 6- and 12-months). The currencies for nine countries were grouped into three regions: Northeast Asia (China, Korea and Taiwan); South/Southeast Asia (India, Indonesia and Philippines); and Latin America (Brazil, Chile and Columbia). The currency for each selected country was evaluated within the regionally determined tri-currency system. We found that NDF markets play a dominant role over DF markets with regard to price discovery during periods of tranquility. During periods of crisis, both NDF and DF markets exhibit a more balanced impact on currency market price discovery mechanisms. In addition, distinct differences were observed across regions: currencies in Northeast Asia were shown to be affected by the Chinese renminbi during periods of crisis and the Indian rupee could be regarded as the dominant currency in South/Southeast Asia. No robust results were obtained with regard to the dominance of currencies in Latin America. Finally, our results also suggest important distinctions between the effect of various instrument maturities on NDF and DF market returns – with DF returns being more responsive to longer maturities (6-months and 12-months). During tranquil periods NDF returns are more responsive to shorter maturities, but during crisis periods this effect is diminished.

PDB21 - Cost-Effectiveness Analysis of Dapagliflozin Versus Glimepiride as Monotherapy in Patients with Type 2 Diabetes Mellitus in China

To evaluate the long-term cost-effectiveness of dapagliflozin (a novel sodium-glucose co-transporter -2 inhibitor) versus glimepiride (a widely used sulfonylureas), when applied as monotherapy in patients with type 2 diabetes mellitus (T2DM) in China. Literature screening, meta-analysis and indirect comparison were used to evaluate the efficacy and safety between dapagliflozin and glimepiride. Direct medication costs and medical expenditure on treating diabetes related comorbidities were calculated based on published and local source and reported in 2015 Chinese Renminbi (RMB). A discount rate of 3% was applied to both costs and health effects. The Cardiff model, an economic model designed to evaluate the cost-effectiveness of comparator therapies in diabetes, was used to generate outputs including macrovascular and microvascular complications, diabetes-specific mortality, costs and quality-adjusted life years (QALYs) over a time horizon of 40 years from the societal perspective. Univariate and probabilistic sensitivity analyses were performed to assess uncertainty in the model results. Compared with glimepiride, patients on dapagliflozin gained 0.96 QALYs, at an incremental cost saving of RMB 52,380 in our simulated cohort. This resulted in a cost saving of RMB 54,602 per QALY gained with dapagliflozin. The cost-effectiveness results were robust to various sensitivity analyses including probabilistic sensitivity analysis Compared with glimepiride, dapagliflozin as monotherapy for T2DM is a more cost-effective treatment in China

Economic Evaluation of Sevelamer versus Calcium-based Binders in Treating Hyperphosphatemia among Patients with End-stage Renal Disease in China

PurposeTo conduct a cost-effectiveness analysis study of sevelamer versus calcium-based binders (CBBs) in treating hyperphosphatemia among patients with end-stage renal disease (ESRD) in China. MethodsA decision-analytic model of a lifetime horizon was used for base case analysis from the payers’ perspective. The transition probabilities between different health states were derived from survival analysis. The overall survival of CBBs was derived from the Dialysis Clinical Outcomes Revisited study for up to 44 months and a Weibull regression model was used to extrapolate the overall survival to a lifetime horizon. A hazard ratio (0.54; 95% CI, 0.32–0.93) of the overall survival for sevelamer versus CBBs was used to calculate the survival of the sevelamer group. Clinical and cost data were derived from literature and health care system in the local setting. Incremental life year and quality-adjusted life year (QALY) were the primary outcomes. One-way and probabilistic sensitivity analyses were conducted to assess the uncertainty of the model assumptions and parameters. The results were reported in 2015 Chinese Renminbi. FindingsThe incremental cost per life year and per QALY gained of sevelamer versus CBBs was ¥44,475 and ¥57,910, respectively. The incremental cost per QALY gained was below the World Health Organization’s recommended cost-effectiveness threshold (¥151,070), which is 3 times the gross domestic product per capita of 2015 in China. The incremental cost-effectiveness ratio was most sensitive to the hazard ratio of overall survival with sevelamer versus CBBs in the 1-way sensitivity analysis. The cost-effectiveness acceptability curve indicated that sevelamer had a 89.6% likelihood of cost-effectiveness at the ¥151,070 threshold. ImplicationsSevelamer is likely to be a cost-effective option in treating hyperphosphatemia among patients with ESRD compared with CBBs in the local context of China.

The internationalisation of the RMB: New starts, jumps and tipping points

We investigate the process of currency internationalisation of the Chinese Renminbi (RMB). Aggregated cross-border data provided by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) allows better measurement of the role played by a currency in trade and settlement. RMB transactions are significant and increasing but remain concentrated in key financial centres. Analysis using an asset pricing framework shows that the footprint of Chinese corporations in international markets has at times been significant, with the size of these transactions prompting many to reassess the likely pace of RMB internationalisation and its usage as an alternate vehicle currency.

AN ESTIMATION OF CHINESE RENMINBI EXCHANGE RATE IMPACT ON THE REAL EXPORTS OF INDONESIA TO THE US: IS THERE A J-CURVE?

This paper seeks whether a J-Curve exists on the impact of changes in the Chinese Renminbi (RMB) exchange rates on bilateral exports of Indonesia to the United States (US), particularly in the long run. The Johansen cointegration procedures and Vector Error Correction Model (VECM) regression are applied. The cointegration test shows that there are long-term relationships amongst real GDP of US, Indonesian Rupiah (IDR), real exchange rates and volatility, and Chinese RMB real exchange rates. The result shows that the RMB exchange rate has a negative significant impact (substitution relationship) on Indonesian export to the US. The result also suggests a dissatisfaction of the Marshall-Lerner condition indicating the J-curve phenomenon does not exist.

Evolution of Exchange Rate Behavior in the ASEAN-5 Countries

This paper examines exchange rate behavior in the ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). It finds that for the last 10 years there is no evidence that their central banks target particular exchange rate levels against any currency or basket. Thus, contrary to some assertions, they do not belong to a U.S. dollar club, a Japanese yen club, a Chinese renminbi club, or an ASEAN club. At the same time, they clearly try to smooth short-term volatility, particularly vis-a-vis the U.S. dollar. The degree of smoothing declined noticeably after the Asian Financial Crisis and less obviously after the Global Financial Crisis, with heterogeneity across countries. Short-term smoothing without level targeting does not interfere with monetary policies aimed at price stability.

China and the EU: Where next in bilateral trade and investment relations?

Trade and investment relations between China and the European Union (EU) have reached a momentous significance. China is the EU’s No. 1 supplier of goods and its second-largest export market. In turn, the EU is China’s largest trading partner. Not only goods but also services trade has large potential to grow, even as China undergoes a structural transition and the EU’s single market faces headwinds from a surge in state-centric political forces within Europe. Transport and trade-related services are bound to expand significantly as China’s integration into the world economy continues. Moreover, Chinese tourists have been flocking to Europe in ever greater numbers, giving a boost to related business. Foreign direct investment (FDI) is becoming the next engine of the China–EU partnership. While the EU is a long-standing investor in China, Chinese direct investment accounts for <1 % of the EU’s total inbound FDI stock. Investment relations have seen tremendous dynamism in line with Chinese companies’ outward expansion and Chinese M&A deals vis-a-vis the EU have grown rapidly in magnitude, scope and sophistication. Finally, plenty of headroom exists for greater adoption of the use of the Chinese Renminbi (RMB) in Europe, supporting financing of both investment and trade. The Bilateral Investment Treaty (BIT) currently in negotiation between China and the EU as well as growing rather than declining interdependence of trade and investment highlight the future potential for a comprehensive free trade agreement between the EU and China.

Asymmetric loss and rationality of Chinese renminbi forecasts: An implication for the trade between China and the US

This study examines the asymmetry of the loss function in Chinese renminbi exchange rate forecasts and tests the rationality of the forecasts, assuming a possibly asymmetric loss function. The results indicate that the majority of forecasters have asymmetric loss adverse to US dollar appreciation and the direction of asymmetry is associated with institutional bases, in particular, those in the US. It is consistent with the facts that RMB is often said to be undervalued and there are political conflicts between China and its largest trade partner, the US. This study also finds evidence of rationality under an asymmetric loss function. It implies that those forecasters efficiently use the information in key exchange rate indicators.

Chinese renminbi, Mexican peso U.S. dollar exchange rates and their competitive positions in export markets

Since, in the NAFTA era, the Mexican economy is much more advanced in the manufacturing sector than those of other Latin American countries, Mexico competes directly with China for U.S. imports. This study empirically investigates the behavior of the Mexican peso/Chinese yuan, Mexican peso/U.S. dollar, and Chinese yuan/U.S. dollar real exchange rates to determine whether the exchange rate policies serve as contributing factors to the subpar performance of the Mexican economy. The empirical findings suggest that the Mexican, Chinese, and U.S. real exchange rates, over the sample period, prove consistent with predations of the purchasing power parity theory; therefore, exchange rate policies may not be a contributing factor to the poor performance of the Mexican economy

Exchange rate and Chinese outward FDI

ABSTRACTDid the exchange rate (ER) regime change that was announced by the Chinese government in 2005 lead to an increased sensitivity of Chinese multinational companies (MNCs) to ER fluctuations? To answer this question our article considers the effect of ER level, volatility and expectation on the Chinese outward foreign direct investment (OFDI) activities in 119 countries for a period of 2003–2013. We find striking evidence that Chinese Renminbi appreciation has a negative impact on Chinese outward FDI flows, and both higher ER volatility and expected depreciation encourage Chinese outward FDI flows. We introduce two complementary effects that explain these findings: repatriation effect and mercantilist effect. In view of the recent debate about the growing importance of Chinese Renminbi in the international transactions we believe that our research results shed light on the possible impact of ER policies on Chinese MNCs behaviour and global FDI distribution.

Does U.S. Pressure Lead to Changes in China’s Exchange Rate?

:The role of external political pressure in the appreciation of the Chinese renminbi against the U.S. dollar since 2005 has been the subject of debate. While Chinese authorities maintain that only domestic considerations have played a role, whether the appreciation has also been the result of the exercise of international monetary power by the United States has been examined using three different approaches. The results have been contradictory with the weight of studies finding against U.S. pressure having an effect on the exchange rate. In this article, we use Granger causality tests to reexamine the issue using data from 2000–2014. We find evidence that U.S. pressure does Granger-cause renminbi appreciation. We also examine whether U.S. pressure causes the changes in China’s export tax rebates. We find no evidence for this.

The Causes and Methods of Competition between the First World Economies in Asia-Pacific Region

The People’s Republic of China devalued yuan; this fall the United States of America signed the agreement on establishing of the Trans-Pacific partnership. Obviously, the relations between Beijing and Washington, which are already complicated, aggravated. The aim of the article is to review the reasons and methods of rivalry of two largest economies of the world, analysis of the influence of the specified states on the world economy in general. Lately, the thesis, that in today's world the new round of confrontation between "The Crouching Tiger" and "The Awakened Eagle" had begun, spread in various economic sources. Leaders of both countries seek to get support of old allies and look for the new. The mentioned collision of interests of the USA and China will undoubtedly define the direction and an order of development not only for the Pacific Rim, but for the whole world. This determines the relevance of stated purpose for writing the article. When writing the article, theoretical methods of empirical research, concerning aspects of realization of the foreign-economic and investment policy of the USA and China were used. On the basis of method of comparisons and analogies the most significant directions of financial policy of these countries, prospects of US dollar and the Chinese renminbi as leading world currency were taken into consideration. The most probable scenarios for development of relationship between these states based not on competitive contradictions, but on complementarity of the American and Chinese economies were defined. DOI: 10.5901/mjss.2016.v7n2s1p346

A review of RMB internationalisation, investment and financial products with assessment of past trends and discussion of likely future developments

Since 2002 and the start of the Qualified Foreign Institutional Investor (QFII) programme, the Chinese renminbi (RMB) has come a long way. In just a few years, the RMB has been accepted as a major international currency for international trades and payments. It was the fifth most used currency for payments in September 2015 and the second most used currency for trades, being recently included in the International Monetary Fund’s (IMF’s) Special Drawing Reserve (SDR) basket. Although market adoption is real, the RMB remains not freely usable or convertible, which has been compensated by the implementation of a variety of investment channels. Among these are the quotas schemes, Stock Connect, mutual funds recognition between China and Hong Kong as well as the issuance of bonds. On all these markets, convergence can be expected. While much has been done by China already to internationalise its currency and enable easier access to Chinese securities for foreign investors, some additional structural adjustments could still be required, especially providing greater capital account flexibility and developing deeper offshore markets. China’s next challenge might very well be to develop new products in a controlled economy.

Separate Identification of the Chinese Renminbi in the COFER Survey

Following the recent Executive Board decisions on the determination of the renminbi (RMB) as a freely usable currency, effective October 1, 2016, and its inclusion in the SDR basket on the same date, STA intends to separately identify the RMB in the survey on Currency Composition of Official Foreign Exchange Reserves (COFER) beginning with the survey for the fourth quarter of 2016. Consistent with staff’s commitment to consult the Executive Board before separately identifying additional currencies in the COFER survey, this paper sets out the key considerations for the envisaged inclusion of the RMB in the COFER survey.

The Sino-North Korean Border Economy: Money and Power Relations in North Korea

In my article, I examine the use of foreign currency in the Democratic People’s Republic of Korea (DPRK) border economy since the 1980s. I focus not on the US dollar so beloved of elites in Pyongyang but on the steady uptake of Chinese renminbi by nonelites, a phenomenon that emerged first from the economy of the border region that the DPRK shares with China. Relying on testimony from structured interviews conducted in 2014 with former DPRK citizens now based in the Republic of Korea, I position the expansion of foreign currency usage within the history of contemporary DPRK marketization, specifically linking that expansion to economic shocks felt in 1992, 2002, and 2009. I conclude by discussing the threats and opportunities presented by the rising tide of foreign currency possession and use.