PhotosChina's currency swap threatens the greenback?
Since December 2008, China has signed 650 billion yuan (US$95 billion) in currency-swap agreements with Indonesia, Malaysia, South Korea, Hong Kong, Argentina and Belarus, in order to promote greater circulation and convertibility of the Chinese currency (also referred to as the renminbi).
Thailand is reportedly studying a possible currency swap agreement with China that would make it easier for their exporters to settle trade in the two currencies. According to experts, the increased regional use of the yuan for "invoicing, transaction and settlement purposes" could enhance its use as a "store of value". An article by People's Bank of China (PBoC) governor Zhou Xiaochuan on March 2009, which called for an international reserve currency to take the place of the US dollar, created a whirlwind of debate within China's policy circles, and the international community, about the future role of the yuan. While the regional use of the yuan is spreading, analysts have emphasized that it is "usually at the expense of the US dollar as transaction currency, not as reserve currency". Xia Bin, president of the Financial Research Institute of the Development Research Center of the State Council - the Chinese government's executive branch - stated that "China is not pursuing the optimum target of complete internationalization of the yuan, but a suboptimal one: gradual regionalization of the currency". The push for the regionalization of yuan appears to be gathering steam ahead of the scheduled launch of the China-ASEAN Free Trade Area (CAFTA) on January 1, 2010.
Under the terms of CAFTA, there will be zero-tariff for 90% of the products traded between China and ASEAN countries and "substantial opening" in the service trade market. According to some estimates, the total trade between China and ASEAN members could reach $4.5 trillion once the FTA is launched. The launch of CAFTA will provide momentum for broader regional growth and may facilitate a decoupling from the West, as the yuan plays a more prominent role in the regional economy.
Source: realityzone-realityzone.blogspot.com
Since December 2008, China has signed 650 billion yuan (US$95 billion) in currency-swap agreements with Indonesia, Malaysia, South Korea, Hong Kong, Argentina and Belarus, in order to promote greater circulation and convertibility of the Chinese currency (also referred to as the renminbi).
Thailand is reportedly studying a possible currency swap agreement with China that would make it easier for their exporters to settle trade in the two currencies. According to experts, the increased regional use of the yuan for "invoicing, transaction and settlement purposes" could enhance its use as a "store of value". An article by People's Bank of China (PBoC) governor Zhou Xiaochuan on March 2009, which called for an international reserve currency to take the place of the US dollar, created a whirlwind of debate within China's policy circles, and the international community, about the future role of the yuan. While the regional use of the yuan is spreading, analysts have emphasized that it is "usually at the expense of the US dollar as transaction currency, not as reserve currency". Xia Bin, president of the Financial Research Institute of the Development Research Center of the State Council - the Chinese government's executive branch - stated that "China is not pursuing the optimum target of complete internationalization of the yuan, but a suboptimal one: gradual regionalization of the currency". The push for the regionalization of yuan appears to be gathering steam ahead of the scheduled launch of the China-ASEAN Free Trade Area (CAFTA) on January 1, 2010.
Under the terms of CAFTA, there will be zero-tariff for 90% of the products traded between China and ASEAN countries and "substantial opening" in the service trade market. According to some estimates, the total trade between China and ASEAN members could reach $4.5 trillion once the FTA is launched. The launch of CAFTA will provide momentum for broader regional growth and may facilitate a decoupling from the West, as the yuan plays a more prominent role in the regional economy.
Source: realityzone-realityzone.blogspot.com
Publication date: 10/30/2009
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