The Renminbi’s Role in the Global Monetary System

China now has the world’s second largest economy and is a key driver of global growth. But of the six largest economies in the world, China’s renminbi is the only currency not used as a global reserve asset. Although it has recently taken steps to promote the renminbi’s international use, the Chinese government has still not been willing to open its economy to the free flow of capital nor allow a flexible exchange rate. Nevertheless, the sheer size of China’s economy and its rising shares of global output and trade foreshadow a rising role for the renminbi in international finance and trade. The deeper question, however, is whether the renminbi’s global stature will match that of the Chinese economy— and perhaps surpass the U.S. dollar.

On February 7, Global Economy and Development at Brookings hosted a discussion on the renminbi’s prospects as an international currency and its implications from two perspectives—the balance and sustainability of China’s own economic development and the associated implications for the global monetary system. The panelists included Brookings Senior Fellow Eswar Prasad, author of a new report, “The Renminbi’s Role in the Global Monetary System”;  Senior Fellow Donald Kohn; and Stephen Roach, senior lecturer and senior fellow of the Jackson Institute at Yale University. Greg Ip, U.S. economics editor for The Economist, moderated the discussion.

After the program, the panelists took audience questions.