China’s economy is an interesting mix of extremely successful, world-dominating industry and illiberal, restrictive communist politics.
Over the last year, the Chinese government has been allowing yuan clearing centers to operate in certain designated free market nations such as Australia and Canada, but despite the vast amount of business that comes from mainland China, the vast potential that the company holds remains ringfenced.
Yesterday, US Treasury Secretary Jack Lew stated that despite China’s foray into the global markets, albeit on a restricted level, the yuan is not ready to join the elite grouping of currencies used by the International Monetary Fund.
The International Monetary Fund has a specific grouping which includes the US dollar, British pound and Japanese yen, called the Special Drawing Rights basket.
Although Mr. Lew acknowledged that China’s central government has loosened its grip on the yuan, he stated that “further liberalization and reform are needed for the yuan to meet International Monetary Fund standard.”
Mr. Lew’s comments, according to CNN, were made in San Francisco following a trip to Beijing where he met with Chinese officials in order to encourage them to open further markets.
The US government’s Treasury officials consider that China keeps its sovereign currency artificially low by retaining foreign reserves instead of allowing it to move according to market demands in the free market, however as a communist nation, China is not aligned with the free market, thus is not likely to make a move in that direction.