Size Matters? Renminbi Internationalization and the Beijing Consensus

Abstract

To examine whether a China model exists, this essay focuses on the size factor that is often mentioned as a vital factor accounting for China’s economic success. It selects China’s ambitious scheme for internationalizing the RMB and examines how the size factor plays out in policy-making. China’s extremely large economy indeed enables it to diversify institutional settings for the Scheme (e.g. pluralist capitalism can be observed in different pilot zones), while maintaining minimally-efficient economies of scale in each of its policy experiments (e.g. capital flow through restricted mechanisms is sufficient enough to make a significant change even though the capital control remains in place). However, the size factor also poses great challenges to China, including problems of coordinating its large economy, the governance problems that confront extreme market variations, and systemic risk amplified by the large and heterogeneous economy. All that said, the merits of the Scheme are rather in line with the values of neoliberal economics underlying the Washington Consensus. Also, the size factor played a key role too in determining currency policies in other Asian countries during their transitions. This essay concludes that it is difficult to establish any form of Beijing Consensus, or China model, in the context of the RMB internationalization.

Keywords: China, RMB, Beijing Consensus, China model, law and development, currency policy