Subramanian: Renminbi Will Become World’s Reserve Currency

HONG KONG, September 10, 2012 — Arvind Subramanian, Senior Fellow of Peterson Institute for International Economics, argues in his book Eclipse: Living in the Shadow of China's Economic Dominance that the renminbi will take over the dollar as the world's reserve currency within the next 10 to 15 years.

Speaking at Asia Society Hong Kong Center, Subramanian said China’s economic dominance is "more imminent in time, much broader in scope and larger in magnitude" than is currently believed. He argued that an internationalized renminbi would offer the Chinese authorities a way out of buying credit debts. Along with the internationalized renminbi, "the Chinese would get symbolic national pride of displacing the dollar."

Subramanian recommended strengthening the IMF for stability reasons and giving newly affluent countries like China more power. By taking the lead to contribute to the IMF, China in return would rise to positions of power equivalent to those of the U.S. and Europe. "Europe is now a supplicant. If the supplicant can have veto power in the IMF, surely China, as the biggest contributor to the IMF, must have veto power," said Subramanian.

He underlined the importance of embracing multilateralism instead of regionalism like trans-Pacific partnership and bilateralism when dealing with China, stating that the United States should not seek only to contain China but also to empower China.

Reported by Wendy Tang

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