Daniel W. Drezner

The Chinese step closer to currency transparency

That’s the message contained in this Financial Times report: China stepped up the pace of its effort to liberalise its currency regime, allowing more financial institutions and companies to trade foreign currencies in the spot market and introducing renminbi forward contracts and swaps into the onshore interbank market. The announcement follows the landmark move by ...

By , a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast.

That's the message contained in this Financial Times report:

That’s the message contained in this Financial Times report:

China stepped up the pace of its effort to liberalise its currency regime, allowing more financial institutions and companies to trade foreign currencies in the spot market and introducing renminbi forward contracts and swaps into the onshore interbank market. The announcement follows the landmark move by the central bank three weeks ago to scrap the renminbi?s decade-long peg to the US dollar, and is in line with Beijing?s pledge to gradually introduce broader currency reform. It also coincides with a speech by Zhou Xiaochuan, the central bank governor, who was reported by several news agencies to have revealed more details of the make-up of the currency basket to which the renminbi is referenced after it was de-pegged from the US dollar. The US dollar, the Japanese yen, the euro, and the South Korean won are the dominant currencies in the basket, news agencies quoted Mr Zhou as saying in Shanghai. The basket also includes Singapore dollar, sterling pound, the Malaysian ringgit, the Russian rouble, the Australian dollar, the Thai baht and the Canadian dollar, the reports said.

Click here to read Zhou Xiaochuan’s speech. UPDATE: This April 2005 World Economy paper by Michael Funke and J?rg Rahn suggests that even if the renminbi were allowed to float, its appreciation would be far less than many believe.

Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner

Tag: Economics

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