The People’s Republic of China’s Financial Markets: Are They Deep and Liquid Enough for Renminbi Internationalization?

Prince Christian Cruz, Yuning Gao and Lei Lei Song
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Prince Christian Cruz: Asian Development Bank Institute (ADBI)

Finance Working Papers from East Asian Bureau of Economic Research

Abstract: Domestic financial market development is a key determinant of a currency’s international status, and financial depth and market liquidity are two essential attributes for an international currency. This paper discusses the status of the People’s Republic of China’s (PRC) financial markets and their depth and liquidity conditions. The paper also compares the PRC’s financial markets with those in developed and emerging economies, contemporaneously and historically. The paper finds that the PRC’s financial markets are not as deep and liquid as those in developed economies, and are much less so than those with international currencies. To support the internationalization of the renminbi, the PRC needs to remove several major obstacles to deepen its financial markets and improve their liquidity conditions.

Keywords: financial market; financial development; financial depth; market liquidity; Currency Internationalization (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-cna, nep-mac and nep-tra
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Related works:
Working Paper: The People’s Republic of China’s Financial Markets: Are They Deep and Liquid Enough for Renminbi Internationalization? (2014)
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