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Yuan’s Slow Rise Could Mean Trouble for Western Economies
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Yuan’s Slow Rise Could Mean Trouble for Western Economies

Enrico Colombatto
GIS, 2015
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Editorial Rating

8

Qualities

  • Innovative
  • Eye Opening
  • Overview

Recommendation

The yuan’s inclusion in the International Monetary Fund’s Special Drawing Rights solidifies China’s place as the world’s third-largest economic superpower, behind the United States and the European Union. At first blush, the IMF’s decision appears little more than a symbolic triumph for China. But as this thought-provoking article from economist Enrico Colombatto reveals, the decision may be far more significant for China and the global economy’s future than many expect. getAbstract recommends this brief but cogent essay to policy makers and executives.

Take-Aways

  • As of October 2016, the International Monetary Funds’s Special Drawing Rights (SDRs), “the accounting unit the organization uses to carry out financial operations,” will include the Chinese yuan.
  • The yuan’s addition to the SDR comes at the expense of the euro and the British pound.
  • For the renminbi to become a top currency in global markets, China must remove all capital controls, and the currency must trade smoothly without them. Global market participants will also have to feel assured that China will not undo its reforms.

About the Author

Enrico Colombatto is an economics professor at the University of Turin, Italy.

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    V. R. 5 months ago
    The author, Enrico Colombatto, emphasizes the significance of China's rise and explores the conditions necessary for the yuan to become a top global currency.