The ‘Chinese dream’ has been made clear: the yuan will begin convertibility measures in 2013: the People’s Republic will lower interest rates, deregulate foreign investment quotas, and loosen controls on stock and bond markets.
China’s goal for 2013 is economic reform, the State Council
announced Tuesday. But, the state will have to ‘split the economic
baby’ — find a balance between exposure to the free market and
state discipline.
China has signaled it will allow its currency to be bought,
sold, and traded without any state intervention or restriction.
The growth restructure will redefine the global economic
monetary system, as the closed-capital pariah ‘people’s currency’
makes its debut as ‘free’.
The yuan reflects China’s complicated (love-hate) relationship
with capitalism and the global markets, and Margaret Bogenrief, a
co-founder of the financial advisory ACM Partners, deems the
transition inevitable, but doesn’t anticipate it’s going to be
smooth.
The yuan is an economic reflection of China’s perceived
political, socio-economic, and demographic reality and future of
China. Bogenrief describes it as a ‘financial manifestation’ of the
Chinese government’s grand scheme. It is the key to unlock
global markets and the opportunities that come with exposure to the
global markets.
“The yuan will inevitably continue to reflect China’s
struggle to both maximize exposure to open/free markets and the
Chinese government’s push to control China’s people, politics, and
economy,” Bogenrief told RT.
A catch exists. As China tests the waters of capitalism, it is
left at a crosswords. Either the government will turn inward,
continuing its ‘hermit’ status and exert greater control over
markets, or, the yuan will be ‘released’ into the global economy
and traded openly like most other power currencies- the pound,
euro, dollar, and yen.
“China finds itself in an increasingly difficult and
unsustainable economic place, straddling both Communist and
capitalist worlds and ideals. Frankly, China can’t continue to have
it both ways: either the government will be forced to completely
open the economy, thereby unleashing pent up political and economic
frustration and rebellion across the country, or seal and
(somewhat) shut its financial and economic borders, slowing growth
and retreating inward. Whether the Chinese government wants to keep
the yuan as a “hermit” currency or not, the global economy will
eventually force the country to choose one way or another,”
said Bogenrief.
Most economic experts are predicting the yuan will be a
fully convertible currency within the next five years, but
Bogenreif sees vulnerability in the aftershock the transition will
send through the country.
“The process and the aftermath will most likely be an
ugly one for China,” said Bogenrief.
China’s economy, and the yuan, and been driven by the last
30 year export boom.
This article originally appeared on : RT