Renminbi Internationalisation: Precedents and Implications

While it is commonly assumed that there are no known precedents against which to benchmark the internationalisation of the Renminbi (RMB), this paper argues that the PRCs own development experience provides a useful perspective on the internationalisation debate. In particular it indicates that lessons can be learnt from both the successes and the shortcomings of efforts to internationalise the RMB in the 1970s. During this period state-owned banks in Hong Kong played a central role in mobilising finance for foreign trade. Access to Hong Kong’s developed financial institutions allowed the PRC to maximise receipts from foreign trade as well as minimise the risks of undue swings in capital flows. The paper shows that although China no longer faces foreign exchange scarcity, economic reforms have not yet resolved vulnerabilities in China’s financial institutions and as such Hong Kong’s role in mitigating the risk of undue capital swings remains

Do leaders matter? : Chinese politics, leadership transition and the 17th Party Congress

The opaque nature of decision making in China has generated considerable interest in the internecine machinations of elite politics. Particularly, but not only, when it comes to issues of leadership transition, considerations of factional formation and conflict come to the fore. This is partly to explain the transition process itself, but also out of concern for how new leaders might change the direction of Chinese policy. This paper suggests that whilst leaders and leadership changes do matter, they matter less than they once did. This is partly a result of the de-ideologicization and increasing diverse nature of elite interests and group formation. But it is also partly a result of the changed nature of China’s political economy; in short, there is less desire and less ability for new leaders to impose a clear paradigm shift

Continuity and Pragmatism: How Chinese State-Owned Banks adapted to Hong Kong’s Free Market (1949-1978)

One of the puzzling features of China’s post-1978 economic reforms is how quickly its enterprises adapted to the new business environment. An insight into this puzzle is provided by Chinese state-owned banks in Hong Kong. From 1949-78 these banks, led by the Bank of China, represented China’s primary financial interface with the outside world. What distinguished the management of these banks from their peers was their loyalty to communist values. Yet, despite Mao Zedong’s anti-imperialist anti-capitalist ideology, the Bank of China demonstrated extraordinary business pragmatism in its engagement with the international financial system. It also exemplified a high level of management continuity which enabled it to see beyond a volatile and often hostile political environment. The paper shows that the post-1978 retreat from ideology and its replacement with commercial incentives proved costly in terms of professional standards. A homogenisation of bank management also made it more difficult to recruit senior management whose loyalty to the Communist Party could be assumed. These findings highlight the importance of rule variation in explaining international differences in management behaviour. More generally the paper shows the long term importance of Hong Kong’s role as an internationalising force for China’s business and financial sectors