Author: jimmy67

Are Asian central banks using RMB as reserves now? [Copy link] 中文

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Post time 2007-1-12 15:32:32 |Display all floors
Originally posted by chinadaily at 2007-1-12 13:46
that foreign governments taking in RMB as their reserves will prove to be a feasible & wise decision,  because as its value keeps rising,  your storage of it will gain you more.   And, personal ...

I agree with you!

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Post time 2007-1-12 15:34:35 |Display all floors

Dear hanlei

Yes, I agree with you.But we have several basic differences upon the understanding of the concepts of expectation and solvency.  

"But, if the U.S. government keeps borrowing from abroad, and keeps spending like there is no tomorrow". In fact, US is not spending like "there is no future". It is doing so right because it believes it has an affluent, bright future. Only because it is confident enough to pay back, could the country shoulder on so many debts, although nobody doubts it's bad to the US, including Bush himself.  And yes, Bush might be a retard, but his cabinet, think tanks, wealthy sponsors ... are not.  

Second, "other debtor countries will gradually change mind,  and may think U.S. dollars are not as good as say. ", yes, US dollar is depreciating. But like I said before, the absolute value of each unit of currency is nothing but a figure game. As long as dollar is easy to convert, as long as you can exchange it with gold, oil, and other goods, it is still a storage of value and means of transaction. It is back on to the psychological belief by people over the dollar. No matter how cheap it is, as long as it can be used to buy goods instantly, it is a good choice for forex reserve.

Third, I totally agree with your condemination on US' coersion over RMB appreciation. It would be a disaster if yuan rises dramatically in no time. About the central bank wholeselling its US dollar reserve, don't worry. It won't do so, as long as the dollar has the functions I mentioned above. There won't be such day that the People's Bank of China sells out its dollar reserve in one day, one month or even one year.

[ Last edited by zinc06 at 2007-1-12 03:54 PM ]

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Post time 2007-1-12 16:02:26 |Display all floors
The yuan has not well prepared to be accepted as a universal currency, just as the US dollar. When it can "grasp its own fate" and "delevelp in its own pace", the yuan can be used as reserves!

The Chinese currency is gaining weight definitely! Authough Central Bank boss Zhou Xiaochun has vowed in his oftly-used language that China will stick to the prudent monetary police, letting the market play a more bigger and active role and making the yuan a bit flexible. The gains in yuan's value has proved the mounting pressure facing China from the US and other western countries. Not the yuan shows its fexibility, but the Chinese banking officials, in my point of view.

Apart from its constant gains in its value, how the currency's strong performance affect our daily touches on my nerves. Can China's vast crowd of working class cope with the inflation brought about by yuan's gains? Will the government encounter a twinge of criticism?That is the question China should be faced with in the future.!

HK dollars belongs to Hong Kong, which had not been included in the mainland's domain for centuries. Inmy mind, Hk dollars must be in the hands of HK officals and should not follow the mainland currency's suit.

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Post time 2007-1-12 16:52:57 |Display all floors

Agree with the above!

Agree with the above, ushership's first post. : )

Those who say China/HK should abundon US dollars as reserves, ask yourselves what is the ultimate purpose of storing up foreign currencies. The answer is: to prepare for unprecedented incidents that may harm the national economy.

What are the three factors that need to be addressed over each piece of investment?  Safety, liquidty and profitability. In most cases, when safety is higher, profitability is lower and vice versa. Then in which sequence should forex reserve focus on the three? It's safety first, liquidity second and profitability last, I firmly believe so.

Because the reserves are stored to prepare for such disasters like Asian financial crisis, to compensate depositors when the Industrial and Commercial Bank of China is suddenly bankrupt, to buy strategic resources when Iraq can't supply China oil... Safety and liquidity overweigh profitability.

Yes, dollar's value is declining. Yes, it gets lower return from keeping it at hand. -- US dollar has lower profitability
But could US dollars be destroyed over-night? No. Even if your assumption of insolvency is valid, it won't become worthless in a couple of years.   -- US dollar is comparatively safe.
The dollar still prevails as the most popular transaction utensil accepted by almost every country of the globe. And no other rising regional currency is as convenient and fast exchangible as the dollar.  -- US dollar is comparetively highly liquid.

We have to compromise then.  Because of the unique purposes of holding foreign currencies as researves, it is apparent that safety and liquidity are top priorities. That is exatly why the central bank is still reluctant to divert from holding the largest proportion of US dollars as reserves to other currencies.

Finally, about other countries using RMB as forex reserves. RMB is not fully convertible - low liquidity; RMB exchange rate is not solely decided by market forces - low safety; RMB is appreciating - high profitablity.
Compromise again. Dare you use RMB as forex reserve now, before it is fully convertible, if you are the decision-marker of a country?

[ Last edited by zinc06 at 2007-1-12 05:31 PM ]

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hanlei has been deleted
Post time 2007-1-13 09:59:12 |Display all floors

looking to the future

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Post time 2007-1-13 15:04:41 |Display all floors

How can I benefit from RMB appreciation

As a citizen of china, how can benefit from RMB appreciation? Chinese economy is blooming as reported on all papers, but why is my life still hard?

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Post time 2007-1-13 15:42:04 |Display all floors
As the yuan appreciates and becomes stroner, it would certainly become a choice of currencies for forex reserves.

Right now, there are factors to consider -- convertibility of the yuan, stability of the monetary policy and continuity of its national policies. These might have a bearing on other countries in choosing the yuan as a reserve currency. The good thing is China is working on these and the results would likely be those many are looking for.

As the US dollars depreciates vs the yuan and the Euro, the depreciation of HK dollar is inevitable, as it is pegged to the US dollar. This is an issue HK monetary authority would have to ponder over.
Be Good, Do No Evil. May Buddha Preserve Us!

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