Number One Country, Number One Currency?


  • Barry Eichengreen

    1. George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, Department of Economics, University of California, Berkeley, Berkeley, CA, USA
    Search for more papers by this author

  • This paper is based on the text of the World Economy Lecture, Munich, 6 September 2012.


This paper assesses the prospects for renminbi internationalisation, arguing that the process will encounter significant challenges. Some of these are familiar: the Chinese economy, while large, remains poor; China’s financial markets lack depth and liquidity; encouraging international use of the renminbi will require substantial capital account liberalisation, in the course of which things can go wrong. In addition, I highlight a less familiar challenge: China’s political system may be an obstacle to renminbi internationalisation. Since the early nineteenth century, the leading international currency or currencies have been those of countries with democratic political systems where there are constraints on the executive, which have built durable alliances, and where creditors are well represented. This is not a prediction that China must have a Democratic Spring before the renminbi becomes a leading international and reserve currency. But it does suggest that the country will have to contemplate significant political reform.