China’s yuan on track to become Asia ‘anchor’ currency

[beijingwalker]

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The Korea Herald > World > World News
China’s yuan on track to become Asia ‘anchor’ currency, ADB says

2012-07-20 20:22

An employee counts 100 yuan banknotes at a branch of Bank of Communications in Shenyang, China. (Bloomberg)
SINGAPORE (AFP) ― China’s yuan is increasingly being used to settle trade transactions in Asia, gradually cementing its way to becoming a regional ‘anchor’ currency, the Asian Development Bank said Thursday.

The rise of the currency’s use in trade and in the financial markets is likely to nudge China to further open up its financial sector if it wants the yuan to play a bigger global role, the Manila-based lender said.

The yuan, or renminbi, “is being increasingly used to settle trade transactions,” the ADB said in a statement issued in Singapore at the launch of its latest report, the Asian Economic Integration Monitor.

“Over time it could become an anchor currency, helping the region to integrate their economies, cooperate on monetary and finance issues as well as gradually open up the (Chinese) financial market,” the statement said.

Iwan Azis, head of ADB’s Office of Regional Economic Integration, told reporters at the launch that some countries engaging in bilateral trade with China settle in renminbi, and their number has been increasing.

“I know that policymakers in Beijing are actively persuading ASEAN countries to use yuan for their bilateral trade settlement with China,” he said, referring to the 10-member Association of Southeast Asian Nations.

Hong Kong, Singapore and London settle some international trade in yuan, and this month the Singapore Exchange said it is ready to quote, trade, clear and settle securities denominated in yuan, the ADB report said.

“All in all, it makes sense that some of the players ― exporters and importers ― start to accept the use of alternative currency, and since China is the biggest player in the field, they accept the use of the yuan for trade settlement,” Azis said.

He said it is “only a matter of time” before the yuan becomes an anchor currency, given that China is now the world’s second biggest economy.

[Korean]

Too be a reserve currency, the currency must have a massive outflow from the host country, in the form of the trade deficit or as foreign aids and loans denominated in Yuan.

Since China is not running a trade deficit or is handing out large sum of foreign aid, Yuan cannot be a reserve currency. This is the reason why Japan's Yen never became the reserve currency when Japan's economy was at one time larger than the US economy.

[beijingwalker]

Too be a reserve currency, the currency must have a massive outflow from the host country, in the form of the trade deficit or as foreign aids and loans denominated in Yuan.

Since China is not running a trade deficit or is handing out large sum of foreign aid, Yuan cannot be a reserve currency. This is the reason why Japan's Yen never became the reserve currency when Japan's economy was at one time larger than the US economy.

not yet,but on the track to be

Korean central bank to test the water stock RMB reserve mone
Data: 2012-07-03
Guide Reading:
forex metatrader indicators July 1, the Bank of Korea announced that it has begun earlier this year to obtain $ 300 million Qualified Foreign Institutional Investor (QFII) quota to buy Chinese stocks, long-term strategy to advance its forei......
forex metatrader indicatorsJuly 1, the Bank of Korea announced that it has begun earlier this year to obtain $ 300 million Qualified Foreign Institutional Investor (QFII) quota to buy Chinese stocks, long-term strategy to advance its foreign reserve diversification, which is South Korea The central bank first announced the direct investment stock. In March of this year, the Government of Japan for the first time publicly announced that will buy up to 65 billion yuan (10.3 billion U.S. dollars) in Chinese government bonds. Within a few months, Japan, South Koreas central bank has RMB assets showed unprecedented enthusiasm and make real money on the investment plans more in Thailand, Nigeria and other countries have demonstrated a strong interest of Chinese assets, the trends in Chinas capital market mean? What kind of symbolic significance in the process of internationalization of the RMB? With these questions, this reporter July 2 exclusive interview with the deputy director of finance of the Chinese Academy of Social Sciences, Yin Jianfeng.

Yin Jianfeng believe that central banks in Japan, Korea and other countries have been made to the decision of the investment of RMB assets to comply with the national trend of reserve diversification. For China, the amount involved is still very limited, and its symbolic significance than practical significance. "The most important symbolic significance of this trend is apparent marks the yuan as a reserve currency functions, which is an important highlight in the process of RMB internationalization." He said.

Bank of Korea said in a statement issued on July 1 of this investment (U.S. $ 3 billion to buy Chinese stocks) for the Korean reserve diversification to create new opportunities for Korea and China lay the foundation for the establishment of close financial cooperation. The bank official said the central bank has $ 300 million the amount of investment is entrusted to the Chinese asset management companies, to buy shares in the near future in accordance with the investment limit of the Bank of Korea in Shanghai and Shenzhen. Another source revealed that the Bank of Korea has already begun in the inter-bank market in China to buy Chinese bonds, the bank had obtained from Chinas central bank transactions quota of 20 billion yuan (3.2 billion U.S. dollars)

Yin Jianfeng think, RMB-denominated assets attractive to rise is brought about by Chinas rapid economic growth and national strength to enhance the inevitable result. As the worlds second largest economy, Chinas economy decelerated, but experts generally expected to maintain the momentum of growth of 7 percent to 8 percent in the next few years, there is no suspense. In other words, Chinas economic growth will not only continue ranked first in the Group of Twenty, but also is likely to become the worlds largest economy within 10 years. The leading global economic growth means that the huge potential of Chinas capital market, although there is no lack of ups and downs in the Chinese stock market in recent years the phenomenon, but some special reasons, including shares before and after the 2007 reform brought about by market swings. In the context of the risk of comparison, the uncertainty in the global capital market continued to deepen, the relative prospects of the Chinese stock market is vast.

Korean central bank to test the water stock RMB reserve mone_UUFOREX

[Korean]

Korean central bank to test the water stock RMB reserve mone_UUFOREX

Well, Korea runs a massive trade surplus against China(Korea exports twice as much as it imports from China), so Korea has to do something with its yuan holdings.

The same doesn't hold true for most other countries with the exception of Middle Eastern oil exporters, so there is a net currency inflow(not the outflow needed to become a reserve currency) into China with trade surpluses and the foreign direct investments.

[5Star]

Nobody is going to hold that piece of toilet paper called yuan as a curency reserve, can't use it to buy anythang.

[Jun]

Nobody is going to hold that piece of toilet paper called yuan as a curency reserve, can't use it to buy anythang.

Then vietnamese must love the that piece of "toilet paper"
Police seize over 2,600 illegal migrants from Vietnam

[Korean]

Nobody is going to hold that piece of toilet paper called yuan as a curency reserve, can't use it to buy anythang.

Well, countries could use yuan to buy goods and services from China if they could actually get a hold of it; the problem is that with the exception of oil exporters, Taiwan, and Korea, most countries are running a trade deficit against China so yuan isn't circulating outside of China.

In order for Yuan to become a reserve currency, China must trigger a continuous outflow of currency by running a large trade deficit and providing hundreds of billions of yuan in foreign aid. Yuan denominated loans are not good enough for this purpose because loans mature and will flow back to China.

[rcrmj]

Nobody is going to hold that piece of toilet paper called yuan as a curency reserve, can't use it to buy anythang.

lol``what a frustrated monkey````it seems your vietcons and women like Yuan more than the real toilet paper the 'd*ng'

[shuttler]

Well, Korea runs a massive trade surplus against China(Korea exports twice as much as it imports from China), so Korea has to do something with its yuan holdings.

The same doesn't hold true for most other countries with the exception of Middle Eastern oil exporters, so there is a net currency inflow(not the outflow needed to become a reserve currency) into China with trade surpluses and the foreign direct investments.

you are just naive. the trade balance is just one factor out of many reasons in determining whether the currency is a reserve currency consideration or not. China has been having a huge favourable trade balance with usa and still the latter is a dominating reserve currency. Yuan will be next though it takes time!

Nobody is going to hold that piece of toilet paper called yuan as a curency reserve, can't use it to buy anythang.

haha, your anger and jealousy wont help Yuan's going as a favourable currency in the world.

[beijingwalker]

China holds one third of foreign reserves in the world,we should also think about diversify them.

[SinoChallenger]

Too be a reserve currency, the currency must have a massive outflow from the host country, in the form of the trade deficit or as foreign aids and loans denominated in Yuan.

Since China is not running a trade deficit or is handing out large sum of foreign aid, Yuan cannot be a reserve currency. This is the reason why Japan's Yen never became the reserve currency when Japan's economy was at one time larger than the US economy.

LOL at ignorant koreans. It's debt instruments denominated in Yuan not loans.

In order for Yuan to become a reserve currency, China must trigger a continuous outflow of currency by running a large trade deficit and providing hundreds of billions of yuan in foreign aid. Yuan denominated loans are not good enough for this purpose because loans mature and will flow back to China.

So what? As long as East Asia and the rest of the world can't do without buying from China (weapons for example), other nations will have to keep recycling those debt instruments because we won't accept payment in other currencies.

[UKBengali]

Too be a reserve currency, the currency must have a massive outflow from the host country, in the form of the trade deficit or as foreign aids and loans denominated in Yuan.

Since China is not running a trade deficit or is handing out large sum of foreign aid, Yuan cannot be a reserve currency. This is the reason why Japan's Yen never became the reserve currency when Japan's economy was at one time larger than the US economy.

Sorry this is just plain incorrect.

Japan's economy never got any larger than around 60% of the US in 1990.

By 2020 or so Chinese Yuan will dominate Asian trading.

[Alchemy]

Bottomline is that to become Asia ‘anchor’ currency , China needs to stop artificifally controlling and manipulating its currency and be more open like Dollar and Euro .... Which will have too many negative repercussions on Chinese currency then !

So Anchoring is a far fetched dream for now i guess

[manofwar]

LOL at ignorant koreans. It's debt instruments denominated in Yuan not loans.


So what? As long as East Asia and the rest of the world can't do without buying from China (weapons for example), other nations will have to keep recycling those debt instruments because we won't accept payment in other currencies.

But can China afford to do that??? As you said East Asia is dependant on Chinese goods but this is true the other way round too..........
The east Asians can stop buying Chinese and look for other emerging producers like those in Africa or in South Asia like BD, Pakistan and India. They will feel the impact initially but the gap will soon be fulfilled. There is a world outside of China too you know, and it is willing to take any opportunity that slips by China..........
While the producer and retailer is important, the consumer musn't be underestimated either.......

[beijingwalker]

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But can China afford to do that??? As you said East Asia is dependant on Chinese goods but this is true the other way round too..........
The east Asians can stop buying Chinese and look for other emerging producers like those in Africa or in South Asia like BD, Pakistan and India. They will feel the impact initially but the gap will soon be fulfilled. There is a world outside of China too you know, and it is willing to take any opportunity that slips by China..........
While the producer and retailer is important, the consumer musn't be underestimated either.......

China is also the world biggest consuming market for many products and now China is moving up the value chain.and to be a manufacturing base needs a lot of infrastucture,reliable power supply and roads,train and port system,many countries still can't afford those expensive infrastructure.