China’s Glass Ceiling | Geoff Dyer | Foreign Policy

Geoff Dyer points out why China’s Remnibi cannot compete on the international stage with the dollar, even if China’s economy grows larger than the US:

For the renminbi to assume a central role, China would also have to make massive reforms to its own economy. The key to Chinese state capitalism is control over a relatively closed financial system, which allows the Communist Party to funnel huge volumes of cheap credit to select projects, industries, and companies. But to have a truly international currency, one that the world’s central banks want to hold, China would have to let investors from around the world buy and sell large volumes of Chinese financial assets. As a result, Beijing would have to dismantle that system of controls. It would need to permit capital to flow freely in and out of the country, let the market set interest rates and allow the currency to float. An independent legal system and transparent economic policy-making would also be useful. China has a choice. It can have an international currency that might challenge the U.S. dollar or it can keep its brand of state capitalism that has driven the economy and kept the Communist Party in power. But it cannot have both.

Read more at China’s Glass Ceiling – By Geoff Dyer | Foreign Policy.