Renminbi To Enter IMF As China’s Global Influence Grows

Renminbi To Enter IMF As China’s Global Influence Grows

This article is part of a series that will be released before the end of 2015, drawing from The Contour‘s annual print issue titled Upheaval, Revolution & Tragedy: The World of 2015, which can be found online at The Contour: Print Edition

This past two months, the IMF (International Monetary Fund) has approved both the Chinese Yuan and Renminbi to enter global currency, which will open China’s market further and smooth overseas transactions. China’s influence abounds, but despite the Chinese people’s beliefs that their nation with its many accomplishments and strengths should rank first in global power, the future of China’s relations with other countries will continue to unfold in unprecedented and unpredictable ways.

Between the years 1987 and 2001, China’s average GDP (gross domestic product) was 9.8%. China’s economy grew exponentially when Deng Xiaoping, an important leader after Mao, in 1978, shifted to a market economy system where prices are determined by supply and demand and the government has little control over. Consequently, in 2008, through trade with the United States, Hong Kong, South Korea, and Germany, China’s exports were $1.465 trillion, The nation’s imports were impressive as well at $1.156 trillion, trading with Japan, South Korea, Taiwan, and the United States.

With its complete transformation from an agricultural society to the world’s most active industrial market, China has significantly impacted the countries that contributed to its change. As Nicolas Lardy, a senior fellow at the Institute for International Economics says, “These [neighboring] countries’ foreign-policy positions are now taking into account China instead of the United States. … The center of gravity has shifted.” China is surrounded by ambitious countries such as Japan, Vietnam, Taiwan, Australia and Indonesia, who are building relationships with each other in hopes of keeping their own sovereignty in the region.

The international oil industry is a recent development that has prompted China to strengthen its cross-continental relationships, in turn tying the countries and their markets together. China’s demand for raw resources attracts countries with valuable commodities. For instance, China has struck energy deals with Uzbekistan, Iran, Sudan, Myanmar, Chad, and Venezuela, offering economic and military aid, access to Chinese markets, support at UN, soft loans, debt relief, development aid, and Chinese construction of roads, bridges, and power stations. China has invested $8 billion in Sudan, which now supplies over 7% of its oil to China. Economists note that China’s effort to grab oil resources for itself may lead to conflict with the United States in the future.

Due to the international relations between China and foreign countries, the fluctuations of China’s market have had direct effects on other countries. China faced a crash in its stock market this summer. China has the world’s second largest economy and is the world’s the second largest importer, making its market crash an international catastrophe. The markets of many countries that trade with China suffered; Germany’s fell by more than 20%, and the U. S. dollar, British pound, euro, and Japanese yen all weakened. In addition, China is the greatest consumer in iron, ore, zinc, copper, and steel. A fall in China’s economy means a low demand for these resources. The countries who provided these valuable resources have to lower the price of these commodities, weakening their economy too.

In all, China has been very successful in terms of climbing up the ladder to become a G7 power and building strong trade relations with equally powerful countries. However, the nation still has a long way to go in securing trust and limitations to surpass the United States in world power. As Kenneth Lieberthal, a professor of political science at University of Michigan says, “Can [China] do it? No one knows. It’s one of the biggest gambles in history, and we all have stake in how it turns out.”

by Stephanie Yoon ’19