Mizuho China Macro: The PBoC’s progress report on renminbi internationalization & SOE reform (IV): Corruption clouds SOE reform

China Economics Weekly RMB internationalization

I enclose below and attached a commentary by the respected Dr. Shen.

In the section on the Renminbi I would draw your attention to the importance now of gaining SDR status of the Renminbi. This is a step along the road to becoming a world reserve currency. This will surely be part of the dialogue in Washington this week.

He also comments on the SOE reform programme and the expression of some frustration by China’s leadership with both the problems uncovered and the slow pace of reform.

We have long been of the opinion that these problems had become a feature of Chinese companies, especially SOE’s as money became too important. Xi is leading the recovery of the soul of China , but it might take as long as the period of decay – about 25 years.

Managed capitalism requires the SOE’s to be very clean and focused on national objectives. They perform a dual role of meeting the market and leading the overall plans.

Getting them right, and their leaders thinking selflessly is just as important as the requirement that the officials of China are also clean, selfless and not preparing their way to money…

The fight for the soul of China is on and we would hope that good and moral people are the outcome. They believe in shared benefits with other nations, and regional leadership for China as opposed to global power. That is my reading of what they are saying and what they are doing

Stephen



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