The Chinese are losing confidence in their currency, the renminbi, but that hasn't stopped the West – and Europe in particular – from doubling down on it. Europe's efforts to turn the renminbi into a viable reserve currency could succeed, but only if China embraces further market liberalization.
ROME/MADRID – The Chinese are losing confidence in their currency. Faced with faltering economic growth, the People’s Bank of China has stepped up efforts to restore stability to the renminbi, using its vast foreign reserves to prop up its exchange rate and stem the flow of funds fleeing the country. The PBOC’s governor, Zhou Xiaochuan, has repeatedly stated that there is no basis for continued depreciation, but few in the country seem to be listening. In the last quarter of 2015 alone, the net capital outflow amounted to $367 billion.
ROME/MADRID – The Chinese are losing confidence in their currency. Faced with faltering economic growth, the People’s Bank of China has stepped up efforts to restore stability to the renminbi, using its vast foreign reserves to prop up its exchange rate and stem the flow of funds fleeing the country. The PBOC’s governor, Zhou Xiaochuan, has repeatedly stated that there is no basis for continued depreciation, but few in the country seem to be listening. In the last quarter of 2015 alone, the net capital outflow amounted to $367 billion.