China’s Yuan to join World Currency Club
The Voice of Russia
Mar 5, 2011 13:59 Moscow Time
The Central Bank of China has made public a strategic plan for promoting the Yuan as a world reserve currency. This is not impossible, given that the Chinese economy is second only to that of the United States, while the Yuan is available in actually any country.
China’s GDP is estimated at almost 6 trillion dollars, which puts the People’s Republic of China ahead of Japan on the list of the world’s biggest economies. Last year China’s economic growth exceeded 10%, with another 8% to be added this year. This is perfectly feasible, what with the country’s huge domestic market and export potential.
But the Chinese are in no rush to join the world currency club for lack of experience and human resources. They will therefore make one step at a time when acting on this strategy. Two years ago Beijing allowed a number of national companies to export their products for the Yuans. The Central Bank of China simultaneously launched the mechanism of exchanging the Yuans for the national currencies of other countries. The scale-of-exchange growth is nothing short of staggering, - in 2010 it increased by 20 times as against 2009, to reach some 200 billion dollars. True, this is not much compared with the exports proceeds of 1.5 trillion dollars, but this is an important move towards making the Yuan a freely convertible currency, says the Director of the Russian Centre for China’s Economic and Social Studies Andrei Ostrovsky, and elaborates.
But once the Yuan is freely convertible in all operations, Andrei Ostrovsky says, it will be used on a par with the US Dollar. This will be ensured by the fact that the Yuan rests securely on the production of a large amount and assortment of industrial goods and agricultural produce.
China will, besides, open its long-term capital market for foreign investors and encourage foreign issuing banks to fill their stocks with the Chinese national currency.
But the world is rather careful about China’s plans, since China is ruled by the Communist Party, and all market reforms are tightly controlled by the authorities. Western experts believe that once a national currency is made an international reserve currency, it will invariably entail certain political diktat. Yet another problem is that the Yuan is strongly pegged on the Dollar, says Deputy Director of the Russian Institute for the Studies of the Far East Sergei Luzianin, and elaborates.
China is known to be a major holder of US assets, treasury notes. On the other hand, China is the owner of the world’s largest gold and currency reserves. China holds 75% or even 80% of these reserves in the US Dollars. So, a rapid internationalization of the Yuan could cause a meltdown of the dollar market, which is potentially lethal for the financial stability of the Chinese economy.
One can therefore speak of China’s world financial ambitions in the long term only. Still, China’s plans to that end are perfectly feasible, given the country’s unprecedented growth rates.
The Voice of Russia
Mar 5, 2011 13:59 Moscow Time
The Central Bank of China has made public a strategic plan for promoting the Yuan as a world reserve currency. This is not impossible, given that the Chinese economy is second only to that of the United States, while the Yuan is available in actually any country.
China’s GDP is estimated at almost 6 trillion dollars, which puts the People’s Republic of China ahead of Japan on the list of the world’s biggest economies. Last year China’s economic growth exceeded 10%, with another 8% to be added this year. This is perfectly feasible, what with the country’s huge domestic market and export potential.
But the Chinese are in no rush to join the world currency club for lack of experience and human resources. They will therefore make one step at a time when acting on this strategy. Two years ago Beijing allowed a number of national companies to export their products for the Yuans. The Central Bank of China simultaneously launched the mechanism of exchanging the Yuans for the national currencies of other countries. The scale-of-exchange growth is nothing short of staggering, - in 2010 it increased by 20 times as against 2009, to reach some 200 billion dollars. True, this is not much compared with the exports proceeds of 1.5 trillion dollars, but this is an important move towards making the Yuan a freely convertible currency, says the Director of the Russian Centre for China’s Economic and Social Studies Andrei Ostrovsky, and elaborates.
But once the Yuan is freely convertible in all operations, Andrei Ostrovsky says, it will be used on a par with the US Dollar. This will be ensured by the fact that the Yuan rests securely on the production of a large amount and assortment of industrial goods and agricultural produce.
China will, besides, open its long-term capital market for foreign investors and encourage foreign issuing banks to fill their stocks with the Chinese national currency.
But the world is rather careful about China’s plans, since China is ruled by the Communist Party, and all market reforms are tightly controlled by the authorities. Western experts believe that once a national currency is made an international reserve currency, it will invariably entail certain political diktat. Yet another problem is that the Yuan is strongly pegged on the Dollar, says Deputy Director of the Russian Institute for the Studies of the Far East Sergei Luzianin, and elaborates.
China is known to be a major holder of US assets, treasury notes. On the other hand, China is the owner of the world’s largest gold and currency reserves. China holds 75% or even 80% of these reserves in the US Dollars. So, a rapid internationalization of the Yuan could cause a meltdown of the dollar market, which is potentially lethal for the financial stability of the Chinese economy.
One can therefore speak of China’s world financial ambitions in the long term only. Still, China’s plans to that end are perfectly feasible, given the country’s unprecedented growth rates.