Overview

In Gaining Currency, leading China scholar Eswar S. Prasad describes how the renminbi (RMB) is taking the world by storm and explains its role in reshaping global finance.This book sets the recent rise of the RMB, China's currency since 1949, against a sweeping historical backdrop. China issued the world's first paper currency in the 7th century. In the 13th century, Kublai Khan issued the first-ever currency to circulate widely despite not being backed by commodities or precious metals. China also experienced some of the earliest episodes of hyperinflation currency wars. Gaining Currency reveals the interconnections linking China's growing economic might, its expanding international influence, and the rise of its currency. If China plays its cards right by adopting reforms that put its economy and financial markets on the right track, the RMB could rival even the euro and the Japanese yen. Prasad shows, however, that while China has successfully adopted a unique playbook for promoting the RMB, many pitfalls lie ahead for its economy and currency that could limit the RMB's ascendance. The Chinese leadership is pursuing financial liberalization and limited market-oriented reforms, but it has unequivocally repudiated political, legal, and institutional reforms. Therefore, Prasad argues, while the RMB is likely to become a significant reserve currency, it will not attain safe haven status as a currency to which investors turn during crises. In short, the hype predicting the RMB's inevitable rise to global dominance is overblown.Gaining Currency makes a compelling case that, for all its promise, the RMB does not pose a serious challenge to the U.S. dollar's dominance in international finance.

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9780190631055

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One of the world's leading experts on international finance, Prasad clearly explains what China has to do to make the renminbi a global currency. -- Ben S. Bernanke, Distinguished Fellow in Residence, Brookings Institution, and Former Chairman of the Board of Governors of the Federal Reserve System Skillfully drawing on history, international economics and a unique in-depth knowledge of the country, Eswar Prasad provides a compelling and comprehensive assessment of China's role in global currency markets-past, present and future. Containing an analytical road map with key markers, this fascinating book will be of particular importance to all those interested in the prospects for China's growing global prominence and its systemic influence, not only economic and financial but also geo-politically. -- Mohamed El-Erian, Chief Economic Adviser at Allianz, former CEO of PIMCO, and author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse A clear and comprehensive entree to contemporary debate over the direction of China's financial development, with an eye to how the yuan will impinge international financial markets in the future. Extraordinarily helpful for students interested in the nuances of Chinese financial policy, for investors interested in risks inherent in the Chinese development model, and for policymakers who want to better understand how to deal with the rise of China. -- Kenneth Rogoff, Thomas D Cabot Professor of Public Policy, Harvard University In this nuanced, thorough, and balanced book, Prasad-one of the preeminent authorities on China's economy-chronicles how and why the RMB is emerging as a significant international reserve currency. At the same time, he explains that, absent sweeping changes to China's political, legal, regulatory, and banking systems, the RMB is unlikely to tap its full potential and become a 'safe haven' currency. The book will be extremely useful to anyone looking to make sense of the intricacies of China's economic system-where it stands today, and where it's going tomorrow. -- Robert E. Rubin, Co-Chairman, Council on Foreign Relations, and Former U.S. Treasury Secretary The renminbi and its fluctuations will be a key determinant of what happens globally over the next decade. In this important book, Eswar Prasad looks to the past to understand the present and to forecast the future. It is the definitive book on the renminbi. -- Lawrence H. Summers, President Emeritus and Charles W. Eliot University Professor of Harvard University

Author Information

Eswar S. Prasad, Tolani Senior Professor of Trade Policy in the Dyson School at Cornell University, holds the New Century Chair in International Economics at the Brookings Institution and is a research associate at the National Bureau of Economic Research. He is a former head of the IMF's China Division and author of The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance.

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