Abstract:
Scholars of International Political Economy have identified several factors that will drive (or impede) the rise of the Renminbi (RMB) as an international currency, including financial market depth and liquidity, openness, and stability. Calculable risk and uncertainty lead to ambiguities that require understanding – as can be seen in the inability of models in failing to predict the GFC of 2008, subjective and intuitive thinking cannot be discarded in favor of probabilistic risk calculations. These ‘reliable’ estimates of calculable probabilities, social conventions or technologies, such as risk management models, are indispensable for market actors to function in a world where decisions can be both rewarding and damaging. The Renminbi (RMB) is the currency of the world’s second largest economy, the world’s largest exporter and second largest importer, whose capital account is opening up and liquidity is becoming more readily available; so why is there not more interest? Drawing on subjective and objective factors influencing market participants’ decision making when choosing to invest in China, and more specifically the RMB this thesis shows how perceptions of uncertainty are less derived from the conventional American rationalist school of thought when participating in an uncertain market. Participating in the Chinese economy, a market of vast uncertainties, market participants’ decision making takes on a more subjective tone. They are, however, relatively less aware of the subjective, intuitive and social sources of their assessments. The evidence I convey below, obtained from public (financial press articles, financial institutional reports) and private market participants (traders, analysts, bankers) shows that market participants need to utilize and consider the importance of their subjective, intuitive perceptions and to understand the relationship their actions have on internationalization of the RMB, which in turn impacts China’s influence in the international monetary order.