Internationalisation of the Yuan

Discussion in 'International Politics' started by Yusuf, Jun 2, 2010.

  1. Yusuf

    Yusuf GUARDIAN Administrator

    Joined:
    Mar 24, 2009
    Messages:
    24,274
    Likes Received:
    11,287
    Location:
    BANGalore
    China is pushing hard to increase the use of its currency the Yuan and make it a currency of settlement. It has cut deals with several countries in this regard. It has now made a deal with pakistan as well.

    What will be the global implication of a powerful Yuan as per the ambition of the Chinese? What does it mean for other currencies and also india and also is it worth doing business with a currency which is manipulated?
     
  2.  
  3. LETHALFORCE

    LETHALFORCE Moderator Moderator

    Joined:
    Feb 16, 2009
    Messages:
    20,551
    Likes Received:
    6,556
    China will not be able to internationalize the yuan in western nations, China's aim in internationalizing means to do trade only in the Yuan in Chinese terms, why would nations be interested if the they have their own currencies like the Dollar and Euro?? In no way will the Yuan ever replace the dollar like the Chinese are hoping.
     
  4. satyam

    satyam New Member

    Joined:
    May 19, 2010
    Messages:
    140
    Likes Received:
    14
    Only countries like Pakistan, Zimbawe and other military dictators will accept yuan.
     
  5. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    the internationalization is a long term mission for CHina.

    As long as one nation imports goods from China ,then the nation has the potential possiblity and need to accept Yuan as medium of payments,because it can save trade cost .

    Of course, here are some precondition:
    1. foreign Peoples are assured that they can buy any "made in CHina" they need with RMB freely ;
    2.forgine people are assured that value of RMB is steady and hard.
     
  6. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    in fact, Honkong, Taiwan, and a lots southeast Asia countries now already accept yuan .
     
  7. satyam

    satyam New Member

    Joined:
    May 19, 2010
    Messages:
    140
    Likes Received:
    14
    Bhutan, Bangladesh and Nepal also accept rupee. Rupee is also accepted in some parts of UAE. Internationalisation means every country will accept it.And this is not going to happen unless China stops currency manipulation
     
    AkhandBharat likes this.
  8. LETHALFORCE

    LETHALFORCE Moderator Moderator

    Joined:
    Feb 16, 2009
    Messages:
    20,551
    Likes Received:
    6,556
    How can China guarantee this, and this is good trade terms??what about the quality of the product?? and the elusive Chinese brand name??
     
  9. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    1. the biggest barrier for RMB's internationalization is that RMB can not e exchanged freely now.
    RMB can not exchanged freely now,which means that now CHinese center bank dosn't guarantee that RMB in the hands of foreign commons can be used to buy "made in CHina" freely.

    2.whenever one guy want to buy "made in CHina' , buying "made in CHina" with RMB directly always cost less than buying "made in CHina" with USD or EUro indirectly.

    so, the acceptance of RMB has nothing to do with the quality of Chines goods and brand. Instea,it has much to do with the demand of "made in China".

    3. the more "made in CHina" other countries want to buy, the more the demand of RMB is.


    4. CHina is already the biggest exporter and will be in forseeable future. so it is quite natural that RMB will be accepted as one of main hard cash, once China allow RMB to be exchanged freely.
     
    Last edited: Jun 3, 2010
  10. tarunraju

    tarunraju Moderator Moderator

    Joined:
    Sep 18, 2009
    Messages:
    5,317
    Likes Received:
    3,891
    Location:
    Hyderabad
    RMB trade is just there so China could deal, misdeal, and exploit African countries. For Hong Kong and Taiwan, their economies are so greatly intertwined with the mainland that it doesn't matter what currency is used. For others, replacing USD or EUR with RMB to trade with China has its risks involved, you're basically paying your dealer with the currency he can manipulate with. This is also one of the reasons why the idea of Rupee-Ruble trade between India and Russia doesn't have too many takers, because both currencies are volatile. They would rather just use USD or EUR.
     
  11. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    guy, all currencys are "manipulated" in fact, incluiding your beloved USD and Euros. the biggest manipulators are
    US federal reserve bank and EU center bank. haha

    people don't buy rubles much, just because People assure that Russian can provide nothing but oil and weapons.if some day, Russia can provide eveything from chip to ship. then the demand of rubel of course rise
     
  12. LETHALFORCE

    LETHALFORCE Moderator Moderator

    Joined:
    Feb 16, 2009
    Messages:
    20,551
    Likes Received:
    6,556
    As long as the Yuan is linked to the dollar and your US debt holdings are in the trillions China will never be able to internationalize the Yuan.
     
    AkhandBharat likes this.
  13. AkhandBharat

    AkhandBharat Regular Member

    Joined:
    Aug 7, 2009
    Messages:
    542
    Likes Received:
    78
    Location:
    Brokeland
    The world is already suffering from the USD disorder. Why would the world move from USD to RMB when they are so intertwined together? Using an international currency by pegging it to gold would be the best, but that ain't happening anytime soon. Neither is RMB, unless China is willing to get rid of the USD debt which is 25% of its GDP.
     
    LETHALFORCE likes this.
  14. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    sooner or later China will give up RMB's pegging USD. but now it is not the high time.

    the apprication of RMB should be slow and steady. abupt appreciation of RMB not only hurt CHinese economy,but also hurt global economy. nobody can benefit from it.
     
  15. AkhandBharat

    AkhandBharat Regular Member

    Joined:
    Aug 7, 2009
    Messages:
    542
    Likes Received:
    78
    Location:
    Brokeland
    Giving up RMB's pegging to the USD is not enough to internationalize it, considering your GDP holds 25% of USD debt. If China wants to internationalize RMB, it will have to sell off USD, which will mean massive exit of the US companies offshore manufacturing from China, which will in turn mean, massive job loss in China, which would mean civil war in China and a conservative estimate of loss of a decade's worth of growth.

    Keep on daydreaming.
     
    Last edited: Jun 3, 2010
  16. amoy

    amoy Senior Member Senior Member

    Joined:
    Jan 17, 2010
    Messages:
    5,524
    Likes Received:
    1,547
    It's too early to talk about INTERNATIONALIZATION yet. but REGIONalizing Yuan is something going on, at least within E.Asia and even ASEAN, and AusNez

    Besides regionalizing Yuan is one of ways to reduce holding of USD (gradually). Countries trading in RMB may not need to retain that large a reserve in USD like before.
     
  17. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    hahaha, guy,

    offshore manufacturing in CHina has nothing to do with the internationalization of Yuan,but much to do with the low productive cost in China.
     
  18. satyam

    satyam New Member

    Joined:
    May 19, 2010
    Messages:
    140
    Likes Received:
    14
    Low productive cost is directly related to the value of yuan.
     
  19. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    the appreication of Yuan not only increases the cost of domestic production factors such as labours,but also decreases the cost of imported production factors such as iron ores,oils ,coppers...etc.
    as we know, the decrease of imported produciton factors cost can balance the increase of the domestic production cost.

    No model can tell us what would exactly happen, if Yuan were to appreciate.
     
  20. amoy

    amoy Senior Member Senior Member

    Joined:
    Jan 17, 2010
    Messages:
    5,524
    Likes Received:
    1,547
    Deutsche Boerse agrees Chinese joint venture
    27 May 2015

    (Reuters) - Deutsche Boerse has agreed to set up a joint venture with Shanghai Stock Exchange and China Financial Future Exchange to develop and market Chinese shares and ETFs for investors outside mainland China, it said on Wednesday.

    The statement confirmed Reuters reports that the joint venture was set to be unveiled.

    Shanghai Stock Exchange and Deutsche Boerse will each own 40 percent and China Financial Futures Exchange the remaining 20 percent of the venture, to be named “China Europe International Exchange” and incorporated in Germany.

    It will start market operations in the fourth quarter of this year, initially offering cash market products in renminbi.

    “The cross-border use of RMB is increasing rapidly, and RMB internationalisation has become an important strategy
    in the process of the opening up of China’s economy and financial industry,” Deutsche Boerse said in a statement.

    “To promote such a strategy, a well-functioning market with offshore investment and trading opportunities is crucial.”
    [​IMG]
     
  21. pmaitra

    pmaitra Moderator Moderator

    Joined:
    Mar 10, 2009
    Messages:
    31,663
    Likes Received:
    17,161
    Location:
    EST, USA
    Having the US Dollar as the only international currency for trade only helps the US to export its inflation to all countries that have US Dollar reserves. With the Federal Reserve the sole arbitrator in printing US Dollars, the US actually gets the rest of the world to pay for its largess. Mismanagement of the US economy also causes bubbles, which sends ripples all over the world. Moreover, every time there is a transaction between two countries, the US gets to claim jurisdiction over that transaction, just because for a fraction of a second, the transaction is converted into US Dollars. Moreover, the US charges transaction fee on that transaction, even if the US is not party to that transaction. These are the various ways money is leaked out from the rest of the world to the US.

    The world does not need to deal with the aftereffects of the mismanagement of the US Dollar or pay a transaction fee every time there is a transaction not involving the US. Under such circumstances, an alternative currency for international trade is welcome. A single currency monopoly is never a good idea.

    Few things to note:
    • The share of US Dollars in international trade is dwindling.
    • May European countries have joined the Chinese banks.
    • PRC and Russia are dumping US Treasury bonds.
    • IMF is losing its grip on the world economy.

    The trend is out there for everyone to see. The US Dollar is on its way out.

    Many countries will now hedge not only on the US Dollar, but also the RMB.
     

Share This Page