News / Asia

China Pushing for Yuan to be Global Currency

Heda Bayron

Business leaders have mixed views about how soon the Chinese currency might replace the dollar as the world’s dominant currency as Beijing promotes greater use of the yuan. Some say Beijing must carry out more reforms for that to happen.

Even as the United States and other countries complain that China’s yuan is deliberately undervalued, Beijing is pushing to make its currency more internationally accepted, commensurate with its growing economic influence.

Chinese officials say they want to make the yuan a global currency like the dollar. And President Hu Jintao told the Wall Street Journal this month, that the global financial system dominated by the dollar is a "a thing of the past”.

"It’s one of the first times that a country has actively tried to promote its own currency as an international currency, most other currencies like that have had that role thrust upon it," said Robert Mundell, an economics professor at Columbia University in New York.

But while many business leaders agree that the yuan, also called the renminbi, will eventually reach global stature, they say it is unlikely to replace the dollar anytime soon.

"I don’t see in the short term the renminbi replacing the dollar," said John Peace, chairman of the British bank Standard Chartered. "What I do see the renminbi becoming as important as the dollar. But I don’t think this necessarily is measured in centuries, I think this can happen quite quickly."

One reason some economists think the yuan will not quickly replace the dollar is that China strictly controls the flow of yuan outside the country.

Foreign companies operating in China usually must convert yuan revenues to U.S. dollars before remitting the money to their headquarters. And those buying goods in China pay for them in dollars.

Starting in 2009, however, China has gradually eased those controls. Trade settlement services in yuan are now being offered outside China. Large U.S. companies like McDonalds and Caterpillar have raised money by issuing yuan bonds in Hong Kong.

But Victor Fung, chairman of Li & Fung, a major supplier to large U.S. retailers, is skeptical that large U.S. companies will start using the yuan.

"Will people be conducting trade in renminbi, or willing to conduct trade in renminbi, to me is going to be the key issue," Fung said. "There, I’m less optimistic about the timing. If I’m a big U.S. retailer buying from China, my exposure is in U.S. dollars, I would love to continue to buy in U.S. dollars. What is my incentive to shift my Chinese purchases to renminbi? I think that’s the most fundamental issue that we want to address if you want to internationalize the renminbi in the short run."

Levin Zhu, chief executive of China International Capital Corporation, and son of former Chinese Premier Zhu Rongji, says the question of how soon businesses will use the yuan for trade hinges on how easily they can exchange it with other currencies.

"I think it should be convertible before it could be really internationalized," Zhu said.

Fully convertible currencies, such as the dollar and the euro, can be changed into other currencies or gold at any time, without government restrictions.

That is not now possible with the yuan. And convertibility has risks because such currencies can swing in value, and China has strongly resisted all pressure on it let the yuan rise in value. Doing so would make Chinese exports more expensive overseas, and economists and political analysts say Beijing does not want to do anything that could reduce jobs.

Still, Chinese authorities are encouraging more yuan-denominated financial products to attract international investors. Reports say Hong Kong’s stock market may see a yuan-denominated initial public offering this year.

Zhang Jianjun is the president of the People’s Bank of China Shenzhen Central sub-branch. He says Beijing plans more such measures.

Zhang says the central bank is studying the use of the yuan in foreign direct investments in China and overseas investments by Chinese companies, which is currently being tested.

He says if the yuan is to be accepted like other major currencies, it must be allowed to flow both ways.

You May Like

Ukraine Purges Interior Ministry Leadership With Pro-Russian Ties

Interior Minister Avakov says 91 people 'in positions of leadership' have been fired, including 8 generals found to have links to past pro-Moscow governments More

US Airlines Point to Additional Problems of any Ebola Travel Ban

Airline officials note that even under travel ban, they may not be able to determine where passenger set out from, as there are no direct flights from Liberia, Guinea or Sierra Leone More

Nigerian President to Seek Another Term

Goodluck Jonathan has faced intense criticism for failing to stop Boko Haram militants More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Talks to Resume on Winter Gas for Ukrainei
X
Al Pessin
October 25, 2014 4:21 PM
Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Talks to Resume on Winter Gas for Ukraine

Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.

All About America

AppleAndroid