Last Friday, the Pangoal Institution and TWAI organized the conference “The Belt and Road Initiative and China-EU Economic and Trade Ties.” Guests included Former Prime Minister of Italy, Former President of the European Commission Romano Prodi, President of the Pangoal Institution Yi Peng, Professor from Peking University Enrico Fardella, Former Deputy Administrator of State Administration of Taxation Xu Shanda, Professor of Applied Economics, University of Ferrara Giorgio Prodi and Head of China Economic Policy Program Michele Geraci. We discussed future cooperation between China and EU under One Belt and one Road.
In my view, “One belt one toad initiative cannot be linked to the internationalization of the RMB. The two are two different things that travel at different speeds and, in the case of the RMB, taking steps back. This is not bad news at all. Indeed, I have always argued that China needs to halt the process of RMB internationalization because the current structure of the economy would not survive a simultaneous “marketisation” of exchange rate and domestic interest rates. Therefore, while most observers get positively excited when they see that the RMB gains ground in international trade, I actually get worried for the stability of the Chinese economy.
At the same time, I have positively welcome the step back and retrenchment that the RMB has experienced during the whole of 2016.