China To Challenge US Dollar Reserve Currency Status

[ahfatzia]

self deleted (wrong thread)

 

[dzgame]

Quit acting like an infant wetting his diapers.
Yes, we are challenging the US dollar. Because we are the SINOCHALLENGER!!

What are they going to do? Our 3000 nukes are waiting! Go ahead..... make our day

here comes my entertainment for the day...the megaton gang general....

On topic, chinese economy is very much dependent on U.S. As far as i know US is their largest trade partner so fall of $ or US economy will directly affect china and Yuan.

 

[Audio]

Rumors are that investing in food and energy is one of the more prudent things you can do with your money if you can afford it.

 

[anarchy 99]

yes .003% is going to challenge 85% . Not this all over again. These talks of grandeur...

Those numbers are out of date, the BIS publishes their forex transactions data every 3 years.
The yuan really took off in 2011 and 2012.

The yuan is now the 14th (as of September 2012) most used currency in trade.
This was data from SWIFT.
Yuan was 20th at the start of the year.
By the end of next year the yuan will be between 5th to 10th most used currency in trade.

 

[anarchy 99]

In order for the yuan to be a reserve currency, China must run a massive trade deficit of something like half a trillion dollars a year. After all, foreigners must have yuan bills in their hands to be able to use it. But the moment China runs the massive trade deficit, Chinese economy collapses and unemployment rate shoots up, so the CCP cannot run a trade deficit.

In other word, becoming a reserve currency is impossible for an exports-dependent economy like China. This is why yen never became a reserve currency, and why the yuan can never become a reserve currency.

LOL didn't I teach a you a lesson in economics before.
Noob.
The US had current account SURPLUSES in 1950's and 1960's.
Didn't stop them then being the reserve currency.

If you don't understand economics, don't talk economics noob.

 

[UKBengali]

LOL didn't I teach a you a lesson in economics before.
Noob.
The US had current account SURPLUSES in 1950's and 1960's.
Didn't stop them then being the reserve currency.

If you don't understand economics, don't talk economics noob.

He just hates China so all his opinions are framed to suit this agenda.

 

[anarchy 99]

He just hates China so all his opinions are framed to suit this agenda.

Yup, Indians feel totally humiliated that the only they can do is hate us.

India is a footnote in this world.

 

[Korean]

LOL didn't I teach a you a lesson in economics before.
Noob.
The US had current account SURPLUSES in 1950's and 1960's.
Didn't stop them then being the reserve currency.

That's because the US provided tons of foreign aid, including the Marshall Plan which was 5% of US GDP.

The math is simple yet clear; you must have an outflow of your currency in order for the foreigners to use your currency. The US had provided tons of aid money around the world to make this happen. The Korean war and the Vietnam war also triggered hundreds of billions of dollars(equivalent to trillions of dollars today) to be spent overseas.

Since it is unlikely that China would suddenly go into a mass foreign aid mode like the US in the 40~60s, China's the other option is the trade deficit, where China pays in yuan for goods and services provided. But since China's exporters will be paid in dollars and euros, there has to be a net deficit in order for the yuan to flow outside of China. But doing so would force China to enter a recession.

And the second problem is the high counterfeit rate of yuan notes, estimated at 10 percent. No one's gonna have a faith in a currency with a 10 percent counterfeit ratio. In fact, small scale exporters to China charge 10 percent more if paid in yuan cash, since 10 percent of the bills would be fake. The lowest prices are offered in USD, and bank-wired yuan a little more(for the exchange cost to dollars), but an automatic 10 percent surcharge for the yuan cash in suitcase.

And the importers only pay in dollar and Euro, no need to bother with yuan since China's exporters prefer dollar anyway.

If you don't understand economics

It is you who doesn't understand.

 

[anarchy 99]

That's because the US provided tons of foreign aid, including the Marshall Plan which was 5% of US GDP.

The math is simple yet clear; you must have an outflow of your currency in order for the foreigners to use your currency. The US had provided tons of aid money around the world to make this happen. The Korean war and the Vietnam war also triggered hundreds of billions of dollars(equivalent to trillions of dollars today) to be spent overseas.

Since it is unlikely that China would suddenly go into a mass foreign aid mode like the US in the 40~60s, China's the other option is the trade deficit, where China pays in yuan for goods and services provided. But since China's exporters will be paid in dollars and euros, there has to be a net deficit in order for the yuan to flow outside of China. But doing so would force China to enter a recession.

And the second problem is the high counterfeit rate of yuan notes, estimated at 10 percent. No one's gonna have a faith in a currency with a 10 percent counterfeit ratio. In fact, small scale exporters to China charge 10 percent more if paid in yuan cash, since 10 percent of the bills would be fake. The lowest prices are offered in USD, and bank-wired yuan a little more(for the exchange cost to dollars), but an automatic 10 percent surcharge for the yuan cash in suitcase.

And the importers only pay in dollar and Euro, no need to bother with yuan since China's exporters prefer dollar anyway.


It is you who doesn't understand.

you cannot run a reserve currency on aid you clown.
The reserve currency is about stability and at the time the dollar was the most stable currency, it was also backed by gold.
There is zero evidence in economic theory that to be a reserve currency you need to run current account deficits.
Japan run current account surpluses and the yen is one of the major reserve currencies used in trade, investment and finance and used as forex reserves.

You get hold of currencies from trade, investment and finance.
You can invest in corporate bonds, junk bonds, municipal bonds, stocks, CDs, etc and accumulate currency.
The offshore yuan centers like Hong Kong offers global investors a way to hold yuan.
The yuan deposits in Hong Kong has grown like crazy.
Hong Kong is now introducing derivatives denominated in yuan for investors to invest in yuan products.
This way the yuan liquidity outside china will grow.

Chinese importers have paid with yuan but Chinese exporters have been paid in dollars because foreign exporters don't want to give up their yuan as the yuan is appreciating. They want to hold onto the yuan to take advantage of the appreciation.
But now the CA surplus has narrowed to 3%, so the yuan appreciation will slow as yuan is near equilibrium, this makes foreign exporters indifferent in holding yuan.
Thus they will be more willing to sell their yuan for Chinese goods as the yuan is at equilibrium and its not a one way bet.
Trade in yuan will grow.

Your whole notion that you have to run a current account deficit to be a world reserve currency shows your very limited knowledge of economics.

 

[Korean]

you cannot run a reserve currency

The US did.

There is zero evidence in economic theory that to be a reserve currency you need to run current account deficits.

How else do you circulate the reserve currency outside of the host country?

Japan run current account surpluses and the yen is one of the major reserve currencies

Yen is not a reserve currency. If yen is your definition of what a reserved currency is, no wonder you are so confused.

One of the first thing you can do with a reserve currency is to buy oil with it. You can buy oil with dollar and euro, but not in yen, and not even a sanctioned country desperate for foreign currency like Iran would take yuan as the method of China's oil payment; it's all dollars.

You get hold of currencies from trade

When China runs a trade deficit of course.

investment

China invests in dollars and euros, not yuan. Because no 3rd world country would exchange their currency for yuan.

The offshore yuan centers like Hong Kong offers global investors a way to hold yuan.

And the only place.

Chinese importers have paid with yuan

Which is then exchanged for dollars before wiring the money out of China.

Chinese exporters have been paid in dollars because foreign exporters don't want to give up their yuan as the yuan is appreciating.

What are you talking about. Companies exporting to China need the money ASAP to pay for their cost of operation. They do not have the luxury of holding on to the proceeds from their sales in China.

Your whole notion that you have to run a current account deficit to be a world reserve currency shows your very limited knowledge of economics.

At least I am not the idiot claiming yen to be a reserve currency.

 

[Hasbara Buster]

In a immediate term no one can challenge the dollar supremacy as the world reserved currency and we're merely striving for the RMB to be the alternative currency when the dollar is not conveniently available for our trading partners. Don't turn the spot light on us please for we don't want the Yuan to go the ways of the Euro and the Yen when the mighty Uncle Sam takes notice..

True, it will take a couple of decades. But this process is irreversible. The end of the last Roman Empire is in sight.

 

[Korean]

True, it will take a couple of decades. But this process is irreversible.

Well, things didn't go well for yen, so yuan will follow the footsteps of yen.

 

[Fanling Monk]

True, it will take a couple of decades. But this process is irreversible. The end of the last Roman Empire is in sight.

Within a decade I think you'll see the other world, by that I mean most of the NAM countries, will use the Yuan as an alternative currency in limited ways to trade with each other rather than with China alone. The way when the Mighty One flexes her muscle or the dollar is in troubles, mechanisms are already in place for international trade to continue. After all the world doesn't want to hold hostage to only one alternative or alternatives that belong to the same camp.

 

[Juice]

Yes, gold is arbitrary, with the added disadvantage that you can't easily adjust the money supply to counter inflation or deflation.

Or wire it etc.

 

[Type 052D]

But that would lead to the appriation of the Yen as currency rather devalueing it for an export oriented economy.