On the evening of November 5th, the 24th Tao Xiang International Finance Lecture was successfully held online. Professor Bian Weihong, head of the international finance team of Bank of China Research Institute, Ph.D. in economics, gave a speech entitled “The Evolution of International Leading Currencies and the Dispute over Currency Pricing Power-Thoughts Based on LIBOR Alternatives Reform”. The lecture was presided over by Qian Zongxin, special researcher of International Monetary Institute (IMI) and Vice Chairperson of School of Finance, Renmin University of China (RUC), and participants include Professor Zhao Xijun, academic member of IMI and co-president of China Capital Market Research Institute (CCMRI), RUC, Professor Ma Yong, special researcher of IMI from School of Finance and master students of School of Finance, RUC.

Professor Bian Weihong introduced some problems in the evolution of finance and international leading currencies from a historical perspective, and then made a special analysis on the current LIBOR alternatives.

First of all, she pointed out that finance is indispensable to the development of human society, which brings problems but also provides new methods for human beings to solve social problems. The succession of great powersis embodied in the financial history with the Dutch guilder and the British pound exemplifying the great cycle where financial success coincides with the rise of nations.Then, she concluded that the US dollar is in decline in the context of increased doubts worldwide about the international status of the US dollar, unlimited injection of liquidity, and excessive debt that dents confidence in the US dollar.

Later, Professor Bian elaborated on the new features of RMB internationalization against the backdrop of the great divergence in the global economy, the surging debt risk of the United States and the shift of the Federal Reserve’s monetary policies. The internationalization of RMB is a systematic project that cangenerate the butterfly effect, which requiresus to adopt a rational perspective on the current market scale, function evolution and offshore market development.RMB internationalization should always aim at serving the development of the real economy and misuse of RMB as a currency for arbitrage should be shunned. In the process of guarding against risks, we should especially learn from the declining pricing power of the US dollar and avoid suchan issue in RMB internationalization.

LIBOR manipulation scandal has exposed the conflicts of interest in the US dollar pricing system, severely weakened its credibility as the global benchmark interest rate, and thus triggered the reform of the US dollar benchmark interest rate. The ramifications of LIBOR alternatives reform on financial stability are still uncertain and risks exist, which suggests thatin the process of financial opening, China should pay attention to the pricing power of RMB, the risks caused by the replacement of global benchmark interest rate and the spillover effect of the Federal Reserve’s monetary policies in SOFR era. At present, in the face of the intertwined public health crisis, climate crisis, energy crisis and great changes in the world economic and financial structure, we should prepare for worst-case scenarios and re-examine the future development path and logic.

In the guest discussion session, Professor Qian Zongxin summarized and emphasized two key points made by Professor Bian Weihong: First, we should learn from the rise and fall of international leading currencies in the past and take history as a mirror. Second, amid the process of RMB internationalization, we should adopt the bottom-line thinking and re-examine the future development path and logic. Based on the future leading currencies proposed by Professor Bian, the next speaker Professor Zhao Xijun looked into the future by predicting the extent to which traditional currencies issued by the government will be influenced by new currencies such as Bitcoin.Professor Ma Yong then pointed out that the United States’ pricing power is a double-edged sword; any policy failure may accelerate the dollar’s decline. Meanwhile, RMB internationalization and China’s overall national strength complement and mutually reinforce each other. Finally, Professor Bian Weihong and Professor Ma Yong discussed how the replacement of LIBOR would affect the intermediary and transmission efficiency of monetary policies.