The European Council on Foreign Relations (ECFR) runs this new article which says that China seems to be backtracking on its pledge to increase market reforms. The article says with the downturn now taking place in China they are faced with some tough choices now. Below are a few quotes from the article.
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"China faces a stark choice: double down or back down on market reforms in order to achieve its long-held ambition of establishing the yuan as a fully international currency, according to a new report from ECFR.
“China, the yuan and the IMF: Double or quits?” is the latest edition of China Analysis, which examines Chinese-language sources to understand the Chinese view on current affairs. This edition focusses on Chinese reactions to the IMF decision to establish the yuan as a “freely usable currency” with the basket of currencies with Special Drawing Rights (SDR). This move from the IMF comes despite the Chinese yuan falling someway short of being a being a fully internationalised, “freely tradable” currency.
Since the much-discussed slowdown in Chinese growth which has taken place in the last few months, Beijing’s willingness to undertake the required market reforms to internationalise the yuan has seemingly waned. This reluctance is explored by Chinese authors who acknowledge that the Chinese government is unwilling to tolerate the free rising and falling of the yuan." . . . .
Here is the Conclusion section of the pdf version of the analysis:
Conclusion
"Overall, it is clear that Chinese observers recognise that the
yuan’s SDR inclusion has mostly a symbolic significance.
Even so, they underline its importance in opening the way
for China to play a greater role in the international monetary
system – an opportunity that Beijing will no doubt seize
with its presidency of the G20 in 2016.
While praising the reforms conducted to date, many of the
observers also point to the significant reform efforts that
have yet to be made, all of them necessary to turn China’s
yuan into a truly international currency. However, writing
around the time of the SDR inclusion, most of them do not reflect on the government’s recent attitude toward China’s
foreign exchange policy.
A statement made by Xi Jinping’s
aide for economic and financial affairs, Liu He, is quite
representative of the situation as a whole. Liu recently
said that “financial regulators must have the courage to
stand against the market”, suggesting that China may still
be unwilling to tolerate too much bi-directionality in its
financial and foreign exchange markets, and may continue
to intervene and seek to control this market for some time
to come."
Added note: NY Times runs this article - Chinese start to lose confidence in their currency
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