Outside the Box: The Importance of RMB Internationalization

IFor the last four years, I have been highlighting the idea that when Beijing floats the renminbi, the  currency may go down, not up, which is the exact opposite of what those who accuse China of currency manipulation believe would happen. I had this very argument with Lindsey Graham two weeks ago at a small dinner in New York, where I listened politely to his positions on a variety of topics until he began talking about currency manipulation. Given that the preceding topic had been the Federal Reserve, and considering that the rest of the world considers the quantitative easing that the Fed did to be the epitome of currency manipulation, I found that I couldn’t sit still; and we engaged in a very, let’s call it intense, back and forth. To the Senator’s credit, and my surprise, after dinner he came over and asked if I would visit him in New York, which is now on my short list of things to do.

Worth Wray and I argued in our just-published book, A Great Leap Forward?, on all things China, that Beijing may ultimately be forced to devalue the RMB in order to regain its still-eroding export competitiveness (especially against Japanese firms) and, in turn, ship its deflation problem abroad. But in the spirit of our book and given that we try to explore different sides of arguments here in Outside the Box, I would like to share a brilliant excerpt from the book by our mutual friend Louis-Vincent Gave. Louis makes a compelling argument not only for why Beijing prefers a strong RMB going forward but also how the RMB can be instrumental in boosting demand for China’s exports as it moves up the value chain.

Like Louis, a number of our contributors to the book are optimistic about the potential for China to succeed. Others see little hope. What we have tried to do in the book is to give you a sense of all sides of the arguments on the key issues. For the optimists to be right we will see need to see certain events unfold in a reasonably timely fashion. If they don’t, it will be time to take a more pessimistic view. We tried to be even-handed and open-minded in our selection of authors and chapter topics. And while we have our own views, we encouraged everyone to present theirs as forcefully as possible.

I’m immensely proud of this book and believe it will become one of the definitive expositions on modern China. And it should be, considering the breadth and depth of the contributing authors, many of whose names you will recognize, while others may be unfamiliar. But I guarantee you, they are all leading experts on the topics they cover. Take a glance at our list of authors (in alphabetical order):

Andrew Batson, Ian Bremmer, Ernan Cui, Jason Daw, Ambrose Evans-Pritchard, Louis-Vincent Gave, David Goldman, Mark Hart, Neil Howe, Simon Hunt, George Magnus, Jawad Mian, Leland Miller, Raoul Pal, Michael Pettis, Sam Rines, Jack Rivkin, Nouriel Roubini, Gillem Tulloch, Logan Wright, and Wei Yao. Plus an introduction and editing by Worth Wray and your humble analyst.

The book is available only in e-book format (for now). You can get it on Amazon Kindle, iTunes Books, and Barnes & Noble Nook. If you want to know more about the book and the authors you can go to the link on my website.

I have now taken up residence in the area of New York City known as NoHo. It’s quite a lively neighborhood, very trendy, don’t you know. I really didn’t know quite what to expect, as we were looking at apartments all over the city, trying to find one that “fit.” But this works for me. Scores of restaurants and a Whole Foods Market within a few blocks, plus enough subway stops that I can get anywhere without too much trouble. I had lunch the other day with Barry Ritholtz.

For those who are near a TV on Friday afternoon, I will be appearing live on FOX Business with my new friend Trish Regan, sometime in the 2 PM Eastern hour.

I had to take a quick trip yesterday to Virginia Beach to see my friend Mark Finn. It was supposed to be hop on down, have a meeting, and jump back on a plane to NYC. Except that the plane was canceled and I had to spend the night and get up at 4 AM the next morning in order to catch the first flight and be on time for my meetings here. I expect to sleep well tonight. Mark was quite apologetic about the canceled flight, but I told him not to worry; this is not exactly the first flight that has been canceled on me. At least there was a nice hotel, and I was able to get booked on that flight out the next morning. Nowhere near the hassle of being canceled on in a foreign country, where you could be stuck for a day or more. Just one of life’s minor inconveniences. The joy of travel and all that.