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Dollar collapse: 7 of 10 Asian countries turn to yuan 0 17 Nov 2012 [Copy link] 中文

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Post time 2012-11-18 15:09:46 |Display all floors




Dollar collapse: 7 of 10 Asian countries turn to yuan              17 Nov 2012

A “renminbi bloc” has been formed in East Asia, as nations in the region abandon the US dollar and peg their currency to the Chinese yuan — a major signal of China’s successful bid to internationalize its currency, a research report has said.

The Peterson Institute for International Economics, or PIIE, said in its latest research that China has moved closer to its long-term goal for the renminbi to become a global reserve currency.

Since the global financial crisis, the report said, more and more nations, especially emerging economies, see the yuan as the main reference currency when setting their exchange rate.

And now seven out of 10 economies in the region — including South Korea, Indonesia, Malaysia, Singapore and Thailand — track the renminbi more closely than they do the US dollar. Only three economies in the group — Hong Kong, Vietnam, and Mongolia — still have currencies following the dollar more closely than the renminbi, said the report, posted on the institute’s website.

The South Korean won, for example, has appreciated in sync with the renminbi against the dollar since mid-2010.

China has long vowed to raise its currency’s global sway, along with the rise of its economy, which became the world’s second-biggest last year.

The goal has seen significant development in recent years as the country promotes renminbi-denominated cross-border trade and gradually loosens control over its capital accounts.

As a result, Hong Kong has quickly risen to be the world’s biggest offshore renminbi trading center, with about 600 billion yuan ($95 billion) in deposits.

According to the latest report by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, renminbi-denominated trade accounted for 10 percent of China’s total foreign trade in July. The figure was zero just two years ago.

From July 1 to Aug 31, global payments in the renminbi rose 15.6 percent, according to SWIFT, as payments in other currencies fell 0.9 percent on average.

The renminbi had a market share of 0.53 percent in August and has overtaken the Danish krone to become the 14th-highest global payment currency, the member-owned cooperative said.

Cross-border trade settled in renminbi will triple to 6.5 trillion yuan ($1.03 trillion) within three years as relations with the world’s second-largest economy grow, Royal Bank of Scotland Group PLC was quoted as saying by Bloomberg on Oct 9.

Settlements will grow 12 to 20 percent this year, reaching $1.03 trillion in two years, up from $330.8 billion in 2011, said Janet Ming, head of the China desk for RBS in Europe, Middle East and Africa.

“We’re seeing a lot more customers starting to practice in renminbi,” Ming was quoted as saying by Bloomberg. “For most companies and banks, China and India is where the growth is. If you’re dealing with China, ignoring renminbi is not the right thing to do.”

Wang Jianhui, chief economist with Southwest Securities Co Ltd, agreed. “Investors are looking for new reserve currencies at a time when both the dollar and euro are under pressure. This is a good opportunity for the yuan,” he said.

The Royal Bank of Scotland predicted in a report on Monday that renminbi will become a fully convertible currency in 2015.

The PIIE said that renminbi could rise to the status of an international currency in 10 to 15 years if the country can reform its financial market and allow greater access for foreigners via capital account liberalization.

Forming the new renminbi bloc is the result of China’s rise as the main trading partner in the region. China’s share in East Asian countries’ manufacturing trade has risen from 2 percent in 1991 to about 22 percent this year, according to the PIIE report.

In fact, trade is also propelling the rise of the renminbi outside East Asia. The currencies of India, Chile, Israel, South Africa and Turkey all now follow the renminbi closely, in some cases, more so than the dollar. The renminbi would be more attractive if the country could further liberalize its financial and currency markets, the report said.

Some fear that China might follow Japan’s rise and fall over the past decades, but the institute thinks otherwise.

“They should take note that even during the heady days of the Japanese miracle, the yen never came close to rivaling the dollar as a reference currency. There was never anything close to a yen bloc in East Asia,” the report said.

Source: http://www.chinadaily.com.cn/china/2012-10/24/content_15840495.htm

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Post time 2012-11-18 18:46:35 |Display all floors
Making the yuan the convertible currency in SE Asia countries should be China's priority goal in 2013.


Zhou also called for a convertible Yuan - but 2013 would be too early, I'm afraid. You see, making the Yuan freely convertible means that Chinese citizen can invest abroad if they please. Now as nobody can predict the future, the best thing to do with your money is to invest it in many different places - and that's what will happen, too: rich Chinese will buy foreign stocks, foreign companies and so on. But to do so, they need capital - capital which they'll get by selling their second, third or fourth appartment - and the real estate bubble might burst.
This is a necessary thing to happen - most non-rich Chinese would be happy if they can also afford a flat - but it will bring considerable turbulences to China's economy. And China might even find itself in a short recession (from which it would, however, emerge much stronger).
The problem if you'd take this step as early as next year would be that, China's new government isn't installed steadily yet - the transition process itself takes one or two years. So probably, it won't happen before 2014 or 2015 - or maybe even as late as during the 13th five-year-plan.

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Post time 2012-11-19 02:41:48 |Display all floors
Kbay Post time: 2012-11-18 16:51
Making the yuan the convertible currency in SE Asia countries should be China's priority goal in 201 ...



it is history in making

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Post time 2012-11-20 02:14:22 |Display all floors
Kbay Post time: 2012-11-19 20:47
China is striding to make the yuan convertible in our region first, then maybe .......
These days, ...
These days, you can easily exchange the local currency for RMB in many SE Asia countries in the cubicles


kenyan chap will not be happy with that

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Post time 2012-11-21 15:22:42 |Display all floors
SMITHI Post time: 2012-11-20 02:14
kenyan chap will not be happy with that

hmmm...where are those cheap Anglos that usually belittling China?
seneca n his cronies~



盡忠報國

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Post time 2012-11-21 15:26:05 |Display all floors
slimpanda Post time: 2012-11-21 15:22
hmmm...where are those cheap Anglos that usually belittling China?
seneca n his cronies~

i kind off miss them too

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Post time 2012-11-21 15:38:42 |Display all floors
Kbay Post time: 2012-11-19 20:47
China is striding to make the yuan convertible in our region first, then maybe .......
These days, ...

Unfortunately, these "cubicles" are very few in Mainland China.  And exchanging money at a Chinese bank is a slow process, at best.  Hopefully thjis will change when the yuan becomes fully convertible.  ANd hopefully the customer service in the Mainland banks will improve.

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