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Dollar to Maintain Its Dominance: China Minister

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Dollar to Maintain Its Dominance: China Minister

By Zhou Xin and Simon Rabinovitch
September 8, 2010

XIAMEN, China (Reuters) - The dollar will remain the world's dominant currency for a long time, and the yuan will only gradually emerge as an alternative, Chinese Commerce Minister Chen Deming said on Wednesday.

China has surprised observers in recent months with a rapid succession of policies to promote the yuan's use overseas, but Chen cautioned against heightened expectations, saying that these moves had been limited and regional in focus.

"In terms of currency internationalization, we lack experience and human capital, so we will push this forward prudently," he told reporters on the sidelines of an investment forum in the southeastern coastal city of Xiamen.

China was realistic about the present shape of the international monetary system, recognizing that the dollar was at its center, Chen said.

"There is no stronger currency than the dollar for supporting world economic activities," he said.

The Chinese central bank has, in fact, made no secret of its displeasure with the dollar-led international financial system. Hu Xiaolian, central bank vice governor, said in a recent article that over-reliance on a single currency was a deficiency laid bare by the global financial crisis.

Chen said that stability of major currencies was the key for ensuring a healthy recovery from the global trauma of the past two years.

"If major currencies, especially the U.S. dollar, are not stable, then there will be big fluctuations among international currencies, which may have a big impact on investors," he said.

Beijing has unveiled a series of policies in recent months to make the yuan more attractive globally, from encouraging other countries to settle their trade with China in yuan and creating more investment channels for foreign firms holding the Chinese currency.


Despite all the moves to promote the yuan's circulation abroad, he said stability was going to be the order of the day for its exchange rate.

He saw no signals suggesting that there should be major fluctuations or volatility in its value. He also said that the exchange rate was determined by market forces.

China lifted the yuan from a nearly two-year peg to the dollar on June 19. The yuan has risen only about 0.4 percent against the dollar since then.

Many U.S. lawmakers say that China keeps its currency undervalued to make its products cheaper in global markets, giving its exporters an unfair advantage.

A large rebound in China's trade surplus over the past few months has breathed new life into this criticism.

Beijing is due to report its latest trade figures, covering the month of August, on Friday.

Chen said that China hoped to see a smaller trade surplus this year, but that it been larger than expected so far, partly because of falling commodity prices.

China wants to quell tensions with the United States through quiet talk, not shouting matches, senior officials told White House advisers visiting Beijing on Tuesday.


"There is no stronger currency than the dollar for supporting world economic activities," he said.

GOOD GRIEF!!! Larry Summers must have had the guts to tell china how the cow eats the dang cabbage!!! Why is this guy so "nice" on the dollar??? He has been bashing the dollar for months!! ohhhhhhhhhhhhhh that's right...Larry went over to the tell them "knock it off or we devalue the dollar 50% to CRASH any exports out of china".....hmmmmmmm


totally agree ck..Summers got in Chinas ass

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