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Gaining CurrencyThe Rise of the Renminbi$
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Eswar S. Prasad

Print publication date: 2016

Print ISBN-13: 9780190631055

Published to Oxford Scholarship Online: October 2016

DOI: 10.1093/acprof:oso/9780190631055.001.0001

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The Mirage of Safety

The Mirage of Safety

Chapter:
(p.150) Chapter 7. The Mirage of Safety
Source:
Gaining Currency
Author(s):

Eswar S. Prasad

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190631055.003.0007

This chapter draws a distinction between a reserve currency and a safe haven currency, one that investors turn to for safety during times of financial turmoil. The chapter identifies the characteristics of economies that are home to safe haven currencies. These characteristics include an open and transparent democratic form of government; an independent judiciary; trusted public institutions; central bank independence; and freedom of expression. The chapter argues that the present Chinese leadership’s repudiation of broader political, legal, and institutional reforms makes it unlikely that the RMB will ascend to the status of a safe haven currency.

Keywords:   safe haven, safe financial asset, political, legal, and institutional reforms, central bank independence, rule of law, Communist Party of China (CPC), President Xi Jinping, anti-corruption drive

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