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

Could Nemtsov Threaten Putin in Death as in Life?

Dynamic and debonair opposition leader had supported liberal economic reforms, criticized Russian president's aggression in Ukraine More

Oil Smuggling Highlights Challenges in Shutting Down IS Finances

Pentagon spokesman says Islamic State 'certainly continues to get revenue from the oil industry black market' but that airstrikes have made a dent More

India Focuses on Infrastructure, Investment to Propel Economy

Government expects economy to grow at 8 to 8.5 percent in next fiscal year 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.
US Supreme Court Hears Hijab Discrimination Casei
X
Katherine Gypson
February 25, 2015 11:30 PM
The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video US Supreme Court Hears Hijab Discrimination Case

The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video Falling Gas Prices Hurt Nascent Illinois Hydraulic Fracturing Industry

Falling oil prices are helping consumers purchase cheaper petroleum at the pump. But that’s made hydraulic fracturing or “fracking” less economically viable for the companies in the United States invested in the process. VOA’s Kane Farabaugh reports on one Midwestern town that was hoping to change its fortunes by cashing in on the next big U.S. oil boom.
Video

Video Fighting in Sudan's South Kordofan Fuels Mass Displacement

Heavy fighting in Sudan's South Kordofan state is causing hundreds of thousands to flee into uncertain conditions. Local aid organizations estimate as many as 400,000 civilians have been internally displaced since the conflict began more than three years ago, while another 250,000 have fled across the border to refugee camps in South Sudan. VOA's Adam Bailes reports.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.
Video

Video A Filmmaker Discovers Her Biracial Identity in "Little White Lie

Lacey Schwartz grew up in an upper middle-class Jewish family, in a town in upstate New York where almost everyone she knew was white. She assumed that she was, as well. Her recent documentary, Little White Lie, tells the story of how she uncovered the secret of her true racial background. VOA’s Carolyn Weaver has more on the film.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video US-Cuba Normalization Talks Resume Friday

Negotiations aimed at normalizing diplomatic relations between the U.S. and Cuba resume Friday. On the table: lifting a half-century trade embargo and easing banking and travel restrictions. There's opposition in Congress, but some analysts say there may be sufficient political and economic incentives in both nations for a potential breakthrough this year. VOA's Mil Arcega reports.
Video

Video Pakistan's Deadline For SIM Registration Has Cellphone Users Scrambling

Pakistani cell phone users have until midnight Thursday to register their SIM cards, or their service will be cut off. While some privacy experts worry about government intrusion, many Pakistanis are just worried about keeping their phone lines open. VOA Deewa reporter Arshad Muhmand has more from Peshawar.
Video

Video Myanmar Warns Factory Workers to End Strikes

Outside Myanmar's main city Yangon, thousands of workers walked off their jobs earlier this month demanding a doubling of their wages, pay raises after a year and input from labor unions on industrial regulations. Since Friday, the standoff has grown more tense as police moved in to disrupt the sit-ins, resulting in clashes that injured people from both sides. VOA correspondent Steve Herman visited industrial zones which have become a focus of Myanmar's fledgling workers rights movement.
Video

Video Oscar Winners Do More Than Thank the Academy

The Academy Awards presentation is Hollywood’s night to reward the best movies from the previous year. It’s typically a lot of glitter, a lot of thank you’s, a lot of speeches. But many of this year’s speeches carried messages beyond the thank you's. VOA’s Carolyn Presutti takes a look.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More