Tag: Economics

The Complex Reality Behind the US-China Decoupling

While the pandemic reveals the dangers of overreliance on a single nation’s production facilities, Washington is calling on American MNCs to shift supply chains away from China. However, the economic relationship between the world’s top two economic powers is complex and a rushed decoupling could sink the global economy to unprecedented depths. Instead, both nations should carefully consider how to effectively diversify the risk of economic overdependence while continuing to maintain healthy trade relations.

The Rise of the Renminbi: the Costs and Benefits of Internationalization

In its push for an international RMB, China squares off against the “impossible trinity,” an economic principle stipulating that no open economy can simultaneously manage exchange rates, control monetary policy, and allow for full capital mobility. In recent years, China has attempted to juggle all three at once, but seen limited success. To reap the benefits of a fully internationalized RMB, China must consider the pros and cons of taking a bolder step towards one side of the triangle.

The Digital RMB: A Solution to China’s USD Problem

China plans to drive global demand for the RMB by introducing a PBOC-backed digital currency into OBOR and other Chinese-driven global trade initiatives to lubricate cross border trade. While a digital RMB and China’s recent market reforms alone may not be enough to drive demand for the currency to levels that can eventually challenge USD supremacy, the strategy represents the PBOC’s methodical approach to RMB internationalization.

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