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Page added on March 2, 2014
Yuan to supersede dollar as top reserve currency
The tightly controlled Chinese yuan will eventually supersede the dollar as the top international reserve currency, according to a new poll of institutional investors.
The survey of 200 institutional investors – 100 headquartered in mainland China and 100 outside of it – published by State Street and the Economist Intelligence Unit on Thursday found 53 percent of investors think the renminbi will surpass the U.S. dollar as the world’s major reserve currency.
Optimism was higher within China, where 62 percent said they saw a redback world on the horizon, compared with 43 percent outside China.
“As China’s economic influence grows, the global importance of the renminbi will become magnified. Indeed, while for decades it has been a ‘greenback world’, dominated by the U.S. dollar as the world’s primary reserve currency, many think a ‘redback world’, in which the renminbi enjoys premier status, is increasingly a possibility,” the report accompanying the survey said.Despite being a closely-managed currency, the renminbi’s global clout has been rising steadily. By the end of 2013, the renminbi had become the second most used trade financing currency and ninth most used currency for payments globally.
Recent moves in the yuan have triggered speculation that the People’s Bank of China is getting ready to widen its trading band – which would be a step towards liberalizing the Chinese currency. The yuan is currently allowed to rise or fall by 1 percent in either direction from a level fixed against the dollar each day by the country’s central bank.Ultimately, a greater role for the yuan would require China to liberalize its financial policies, including decreasing exchange-rate intervention, liberalizing interest rates and relaxing restrictions on capital flows.
Two-thirds of the respondents of the survey expect Beijing to complete its financial liberalization within ten years, with a majority expecting major reforms within five.
Financial liberalization in the mainland began in earnest after 2009, with the government’s decision to allow cross-border trade settlement in renminbi, ease the process of listing offshore bonds and introduce the renminbi qualified institutional investors (RQFII) program.
The reforms, however, are still limited in scope, with strict quotas for how much currency can move across the border.
Last year, the government launched the Shanghai free-trade zone as a testing ground for financial reforms, including full yuan convertibility.
14 Comments on "Yuan to supersede dollar as top reserve currency"
Davy, Hermann, MO on Sun, 2nd Mar 2014 2:05 pm
First this is a financial article from CNBC talking heads from the “Lobby of Plenty” & “Human Exceptionalism” It is a referencing a publishing by “Economist Intelligence Unit” and “State Street” both research arms have come out with some doozy predications over the years. “IF”, the complex global interconnect economics system faced with diminishing returns in a predicament of limits of growth, survives the next 5 years we most likely will see a different reserve currency. This will reflect a multi polar world of trade and international alliances. This currency may have a value component possibly being gold. I have seen and heard discussions that the reason China is buying gold and the gold made cheap by market smacking, is a plan afoot by the world central banks for a world currency back by gold. In any case it is the nature of Asia’s rise, the relative diminishment of the US, and significance of Europe’s Euro that wii drive a new fiat currency. China is currently beating down its currency to weed out speculators in the biggest carry trade in the world that centers on the Yaun. There are good reasons for a world reserve currency but it will take very detailed effort by all major players. Europe and China have much to do to make necessary changes to their currencies to facilitate the requirements of being part of this new world currency. There are many here who constantly rant and spew anti American sentiment. This is ashamed because it shows propaganda tendencies and little reality. A diminishment of the US is not the end of the US. The US is the critical node in the new normal interconnected complex global economic system with China and Europe the other. The US has and will remain a major player in multiple areas of trade, military influence, and social trends. If the US corrects, contracts, and or collapses so will the rest of the world in an interconnected economic and financial world. If you think the world can decouple from the US you are mistaken. If you think the world can manage a US correction, contraction, and or collapse you are naïve. The same is true for China and Europe who are the other points in the triangle of economic and financial dependence. Look for some strange trends to happen in the next two years. This is due to the fact the current normal is unstable relying on central bank planning through market manipulation. This cannot last and they know it. Positioning is taking place. All three nodes of the triangle of economic and financial dependence have serious economic and financial issues. China most notable has extreme debt problem at the moment far dwarfing The US, Japan, and Europe. It is unclear how this will shake out with the Yaun and the Chinese system being partially controlled. The biggest factor is the current global system is in a global bubble and how this deflates is far from certain. Bubble builds rationally they default irrationally
Makati1 on Sun, 2nd Mar 2014 3:52 pm
And there are some on here who wave the American flag while in denial of the decline of the Empire and it’s eventual 3rd world level. Who said the collapse will be ‘managed’? It will take down everyone, but the West will be the ones who endure the most pain as they have the greatest distance to fall and are not anywhere near being prepared for it or even acknowledging the possibility.
I suspect that the crash will be followed by a basket of currencies managed by the IMF or some other world organization. That is, IF there is any reset. Somehow, I doubt it will get past a nuclear exchange and then the money system will not be important. We shall see. Russian spy ships in Cuban ports remind me of a past nuclear close call. Pass the popcorn, please…
bobinget on Sun, 2nd Mar 2014 4:16 pm
More “Yellow Peril” bullshit from right wing speculators
with lots of skin in the game themselves.
The ‘digital revolution’ has changed the way these guys operate. When a person or group has billions riding it take but a move of fifth of a percentage point to make millions in a single transaction.
China’s ‘extreme debt problem’ really is no more a ‘problem’ than that of Japan where almost most debt is internal. It’s the Chinese people who stand to lose if
China defaults. It’s the Japanese people who stand to lose if the yen is devalued.
Here’s the best part; It’s the Chinese and Japanese saver who loses if the USD revalues, not American savers and American bond holders of which there are
too few.
When, as now, when Europe stands on the brink of war
panicky rich people will buy US investments not Chinese or Russian or Japanese or Nigerian no matter how adventurous they once may have been.
Then, there is the little matter of fact that several nations from Africa to South America to the Pacific who use USD’s as their ONLY currency internally.
Visit OPEC member Ecuador if you wish to find out where all our dollar bills coins went to die.
Try to use loonies or euros in any store in Central America where USD’s are interchangeable with local
currency.
Find yourself in Venezuela, another OPEC member, act Canadian or Scandinavian because if locals find out you have dollars they won’t leave you alone.
Venezuela can’t import needed consumer goods w/o dollars.
Inflation is measured against dollars.
Davy, Hermann, MO on Sun, 2nd Mar 2014 4:24 pm
My friend Makati and his usual Anti American renditions. No Flag waving here nor any denial. I do not deny the flag waving here in America or the denial of the American general public. Yet, this is a large country, diverse ethnicity, and regionalism. There are many here in America who are already in survival mode far from The Hamptons, Palm Beach, and or Malibu. They are already living relative collapse. They are poor and doing what they can to survive. Makati your judge of pain and consequences appears to me to be some boisterous feel good attempt by you to boost your 3rd world living arrangement comfort level. I doubt you can fill the shoes of millions of Americans with all the various collapse responses of so many different personalities in a soon to be very local world. I see little if any preparedness in the third world other than already being in a state of poverty. The 3rd world will see a huge population drop when the surplus food production of the US and Brazil is diverted to local use. There are few 3rd world nation I know anywhere that are near self-sufficient in food. The United States, Europe, and Brazil will have the ability to fall back on a greatly reduced agricultural production. Many will also be in a state of food insecurity in these surplus food growing regions due to the economics of distribution and failure of fossil production AG. The mega cities in these regions will also find very little help maintaining unsustainable dense populations. The 3rd world where the real overpopulation is and occurring is facing the worst. The most unstable and unsustainable mega cities are in the 3rd world. The worst of climate instability is due in the 3rd world regions. It should be a wild ride for everyone.
rollin on Sun, 2nd Mar 2014 10:29 pm
I do not see a problem with having two reserve currencies. The yuan is tied to the dollar anyway, so what is the big deal. Money is a medium of exchange and as long as the values of the dollar and yuan are relatable, there should be little problem.
The problem is that the real reserve, the production of oil, is flattened out while developing countries are pushing demand. It’s the adjustment to the real limitations of the world that will shake the money system.
action on Mon, 3rd Mar 2014 1:00 am
So 100 of the 200 surveyed were Chinese, and 53% voted yuan, lmao
Makati1 on Mon, 3rd Mar 2014 1:10 am
Dream on Davy… The US cannot survive without huge injections of printed money and plundered oil daily. And over 70% of Americans are on drugs that will disappear when the SHTF. Antidepressants are the most popular and are taken by over half of the adult population. And they have nothing to get depressed about … yet.
So, claim whatever you want and call me anything you want. I made my decision, and from what I see and have experienced in the last 6 years here, I think I made the correct one. The 3rd world may not have ‘enjoyed’ the ‘pleasures’ of the consumer drug but they also will not have the withdrawal pains.
Oh, and if you didn’t notice, US ag is not doing to well in the climate change scenario is it? Mega droughts, polar vortex’, floods, etc. And, it has only begun. Those with food will be the targets of those without, and don’t think the government is not going to regulate and control ALL necessities when the going gets tough. It has already started.
clueless on Mon, 3rd Mar 2014 2:26 am
@Davy. Bwahahahahahaha! The term “3rd world” was coined by the US after WWII to make it appear that they are “1st”. Unfortunately, due to gargantuan karma the befell your idiotic nation, that spent heavily on the industry of war just to stay on top of game, is now suffering and on the verge of total collapse anytime soon, due to it’s massive debts. Should collapse happen right now, US will get the most brunt, and you know exactly why. LOL…Shall i spell it out to you?
Davy, Hermann, MO on Mon, 3rd Mar 2014 2:41 am
Damn, boys, I can always tell someone who is insecure by the way they respond. You two boys seem awful upset over nothing more than a little geopolitical discussion. Too bad you are bent upon blame and complain. You are an example of the human nature that will make it hard for man to make good decisions in a time of grave circumstances. It is a pity our nature is bent on recrimination and resentment!
Arthur on Mon, 3rd Mar 2014 9:11 am
http://en.wikipedia.org/wiki/File:Reserve_currencies.svg
Where’s Yuan?
We seek him here, we seek him there,
Those Chinese seek him everywhere.
Is he in heaven? — Is he in hell?
That damned, elusive scarlet Yuan
Makati1 on Mon, 3rd Mar 2014 11:19 am
Ah Davy, when someone doesn’t agree with your viewpoint, it is not very intelligent to assert that you are correct and they are wrong and not give proof. Perhaps they are seeing things through different eyes and will turn out to be correct. That they dis the US as a failed nation may/will prove correct in the long run even to you. Perhaps you need to get out of MO and travel in the current real world for a while to see outside the petrodollar curtain provided by the Ministry of Propaganda?
I rarely make a statement that cannot be backed up with multiple proofs to anyone with an open mind. Problem is, when I add such proof, it is often put on hold as I am not in the same time zones as the site’s managers. But, I will do so if you want.
And, the US deserves any negative press it gets from it’s citizens. After all, thousands of Americans are giving up their citizenship every year and millions of Americans already live outside of the 50 Police States of America, most with no intention of going back.
And, since when do Americans EVER make the right decisions in anything not for personal gain? They would not be in this fix if they were intelligent, educated, mature humans. After all, they had it all and blew it on a party lifestyle with a dead end. That the end is now here is all they moan about and try to pretend is not happening.
clueless on Mon, 3rd Mar 2014 11:23 am
@Davy. Be afraid, very afraid… tic toc tic toc tic toc tic toc. lol
Davy, Hermann, MO on Mon, 3rd Mar 2014 12:17 pm
Look, Makati and your sidekick Clueless, You are missing the point as usual. In your effort to spew anti American North Korean style propaganda spew, you box yourself in. My concerns with this discussion are twofold. First is your simpleton criticism of the US in a purely superficial criticism and condemnation of a huge land with diverse people. I think this stems from you being an expat who carries a deep resentment with him to his adopted new home from his birth place. You are America bashing to increase your response to the cognitive dissonance you feel of “did I make the right move”. It is obvious, being in a Metro area like you are currently living with 12MIL other souls, you are worried about hunger in a crisis. The second point is we need balance and objectivity in the message we are bringing to the table in this discussion of PO and its resulting potential for contraction or collapse. Your spew distorts the discussion with a propagandist tone not for the truth but for advantage. I feel no exceptionalism for America other than the real achievements of old for example the constitution, bill of rights, and a free market system. All three of these have been hijacked and stepped on by a corrupt political/industrial/rich trio. The US is no longer a true sovereign nation in the earlier sense of a 20th century nationalism. The US is a shell as is the rest of the world nations for a new normal where there are no borders among the rich and powerful. There is of course still nationalism but underneath the strings are pulled by a new alliance of global powerful and the elite. This group has hijacked the system to promote their agenda of greed and gain globally. This is my last response to your spew because it has in my mind quenched fire of your hate with reason. Your side kick Clueless is like a dog that comes to a fight and barks the loudest at the brawl then runs when he is turned to by a combatant.
action on Mon, 3rd Mar 2014 6:41 pm
Wow, Davy just thrashed both of you