Redback mountain

I think the Chinese officials are quite aware of the contradictions inherent in their policy statements. Clearly there is an unresolved policy debate playing out internally in the CCP. We are hearing the echos as one side or the other sees value in going public.

Eventually the side arguing for convertibility will win. The status quo is unsustainable.

The Economist says: “So one theme of the debate covered in the report is how internationalisation can be achieved without liberalisation. It is, in this sense, a metaphor for Chinese politics, too.”

Yet why the debate?

All the “redbacks” needs to do is to follow exactly the take-for-granted liberalization practices of “greenbacks”.

That is, internationalization without liberalization, in other words, with liberalization- the American style; albeit it will take China (or any other nation really) some doing before being able to turn the same trick.

Chinese work hard and their leaders are not afraid to shed chinese blood for whatever suits their views whereas US Govt and citizens are lazy,given to unprincipled behaviour and selfishness.There is too much dependenance on Govt by citizens and businesses in the USA.The rich in USA do not like paying taxes and fight like hell any efforts that may affect their finances.That is not what capitalism is all about,es that USA will and guarantee that China will gain more power.It is not Japan in eighties, mind well.

Is it possible that China is buying gold and when ready may come up with a method to alighn its currency, the Yuan, with a mixture of assests including gold?
What is China's current holding of gold? Has anyone checked who is buying gold?
I have been following the price fluctuations and my feeling is that there is a pattern in which small purchases are made causing the price to rise slowly. When it reaches a peak the buying stops and when the price drops again the small purchases begin again.
There are many organisations in the Chinese government that could be used to buy gold without spooking the market or giving away their hand. Does anybody else have thoughts on this?

Two points - as the value of gold increases - so does the value of the country with the greatest reserves - want to guess who that may be? It's not China. As the Pacific rim becomes more wealthy the cost of living will inevitably rise - concerned? Sell your dollars and euros for Yuan while the exchange rate is still favorble.

You can't analyze Chinese policy making in the same way you analyze the west, western culture is inherently connects trade with prosperity, small European nations can not possibly survive without "international" trade, and the culture that grew out of hundreds of years of thinking this way created what we identify today as the "need" for an international currency. China operates mostly by itself for the past thousand or so years, there is no inherent cultural connection between foreign trade and prosperity, for China foreign trade are a means of acquiring specific resources and does not require a complicated system of currency exchanges for it to function for China's benefit.

If you analyze it that way China has no ultimate desire to replace the USD as international trading currency, what it wants is that all trade between itself and other nation to be done using the yuan. Now if Chinese trade start to make up for a large chunk of world trade then that system will replace the USD by default, but that development is gradual and I wouldn't count on any rapid shift from USD to yuan anytime soon.

Having said that, it does not rule out a rapid switch from the USD to some other international currency.

A few days ago i walked into my local Bank of China branch hoping to buy some US dollars. The bank teller points me to the street sellers loitering by the door. There's a personal example of reminbi internationalisation...

What else can China do when the Green bucks are incessantly devalued by the FED massive printing press? The Chinese would like the internationalisation of the IMF Special Drawing Rights but this move is fiercely opposed by the only purveyor of international exchange rights.

The glory days of the profligate Greenback are numbered, as the mighty Redback surges ahead!

But the internationalisation of the formidable yuan, may not happen the way Uncle Sam would like it to be: viz with a floating yuan. The Chinese hold the reigns & will steer the waggon the way that benefits them more than Uncle Sam. That's a no-brainer!

Brace yourselves for the New Order, folks. It's-a-coming to a lane near you!!

“…It makes clear that the yuan’s overseas expansion might not follow the sort of linear progression many in the West may have assumed.” Generally, Western nations believe that overseas expansion indicates greater trade and therefore prosperity. However, China’s exports total to about $1.204 trillion and their imports total to about $954.3 billion. Clearly there is a disparity between the amount China obtains from its exports and imports. Hence, other nations are more reliant on China than China is on them. For example, the United States is China’s main partner for exports; 20.03% of China’s exports are made to the United States. This being said, China does not need to internationalize the yuan; however globalization does make this difficult to do. China has been able to resist urges to internationalize, but perhaps that is exactly what the yuan is moving towards. The question of liberalization versus internationalization then arises; how can China be a powerful force in world economy/politics if it does not shift to accept “universal values”?

What I don't understand is the conventional wisdom that internationalisation with liberalisation is only way forward for renminbi to take some of the load off the dollar as global reserve currency when the dollar's current fate shd be giving everyone pause.

Do we really want to exchange one superpower issuing the world's reserve currency for another doing it?

Count on Beijing doing the right thing eventually. It may not be exactly to West's liking as usual but those outside US who care abt the world shd stay engaged with China to chart a new way forward instead of sheepishly taking Washington's cue to "do as I say but not as I do"!

The Dollar will be the last soverign global reserve currency. If the world moves away from USD it will not be to another country's currency--it will be toward either global currency (UN, IMF, etc) or to private currency(ies).

Two reasons--market fear of the issuer's manipulation; and issuer fear of market manipulation.

It is difficult for China to balance the 2 contrasting regimes - internationalizing yet stability of the yuan on one hand as opposed to another that may suffered from volatileness or fluctuation due to massive speculation on the part of currency speculators which causes sudden massive devaluation for almost no apparent reasons as back in 1997 when even "tiger economies" like South Korea, Thailand, (even Hong Kong), Philippines, Malaysia and to a disastrous extent in Indonesia resulting eventually the overthrown of their long-reigning leader, President Suharto in so-called "Asian financial crisis".

IN fact many credited China non-convertible yuan then as the reason for the stability in this part of the world then. Of course, China economy rank just 5th or 6th in the world then, as opposed to 2nd 13 years later (now) and destined in less than 2 decades, 1st.

Of course, the reverse may also be detrimental to Chinese economical growth. If massive flow of "hot money" or untimely forced/sudden great appreciation of yuan may resulted Chinese industries stunted, goods uncompetitive in world market which may result in "hollowing out" of Chinese industries as what happen in Japan for almost 2 decades of their "lost years" result of G-7 pressure on the rise of Japanese yen in accordance to the "Plaza Accord"

Due to its misguided policy of currency manipulation rather than maintaining a stable dollar, tt seems that the Dollar could be eased out of the International trading system in favour of a basket of currencies or some other International exchange mechanism sooner than expected.

i am a junior student in Beijing Institute of Technology, i have never been worried about my expense since this year. that is, the rise in price has accelerated this year.
this situation is the last thing that most of the citizens are willing to see.particularly college students. u know, the fiece competition of applying an occupation(because we are too many people that outnumber the vacancy!), the astronomical housing price(out of our imagine comparable to income,i mean such as Beijing, Shanghai and Guangzhou etc.), we have become aware of the situation facing almost every chinese college student,the second rich generaiton and the children of high position aside . Nearly one third of my classmates(includig me) are prepareing for GRE and TOEFL ,the others are either engaged in the preparation of graduate school exams or chatting, gossiping, DOTA, whatever .At first, the intention to getting graduate education is to equipped with more knowledge, but it turned out to be delaying the time of entering the cruel society.
anyhow, do not aim for troubling, we already are mess.

The road to an internationalized currency - for the renminbi or any other - is neither easy nor short. There are four prerequisites to becoming an international currency:

1) Complete capital convertibility; and deep and liquid currency and capital markets.

2) The country has to decide whether having an international currency is worth the pain of developing capital convertibility, liquidity, and liberalized capital markets.

3) Even if a country has prerequisites #1 and #2, the markets will determine whether its currency becomes international - a country can’t do it by official decree.

4) The country has to decide whether its role as an international currency should/will become a policy concern - whether it should intervene in the market.

China is clearly more influential than in the past, and the internationalization of the renminbi has sped up. But it will take a long time - several decades at least - for the renminbi to go global.

If China intends to internationalize the renminbi, it will have to diversify its dollar holdings, and it will necessarily do that gradually. In a recent online poll conducted by the Chinese newspaper Global Times, 87 percent of Chinese respondents called China’s holdings in dollars unsafe. Unsafe or not, they are massive - 60 percent of China’s official reserves are held in dollar-denominated assets. Diversification by Beijing, in other words, would be a very big deal.

John Maynard Keynes said, "If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy." In that regard, China is at the mercy of its dollar holdings. To significantly alter the composition of its reserve portfolio, the country would need to sell huge amounts of U.S. Treasury securities, which would severely depress the price of those securities. If it exchanged large amounts of dollars for other currencies, the value of the dollar would fall dramatically, causing losses on its residual dollar holdings.

(See http://futureofuschinatrade.com/article/yuan-internationalization for more detail.)

Growth of capital 'pond', the nature of employment 'pool' of growth. This in itself is a healthy national economic orientation, not to mention the new job so much social pressure. I dare not mention here the concept of social welfare, about the nature of our country today, the financial distribution system, has not this space, and increase public support so many people, these people's welfare and future wages, increase the staff and increase wages some are national deficit, which uses the next fiscal revenue to pay all of today's retirement money should be extracted. However, I am talking about the two 'pool' relationship, at least half of state revenues the money, to start this cycle, to correct the national economy-oriented.
Han Hu (TigerHan) 2010/12/20

Our national development of private enterprises, the experience of starting from zero capital is me with you to today's national economic development based on the results we have state-owned enterprise reform, private enterprise, but do not have this base, the base of the Employment and exports, the purchasing power of driving the market demand, there is no today's mobile communications, electric power, steel, oil, banking such a big market space, our consumption is the market today, the world's most expensive products and services. Maintenance and development of the development of these monopolies, but also the number of required development of the enterprise base.

If we quantify this concept is that one hundred thirty-eight million new employment, five-year period, half of them to enter the small business, small business is the average per ten count, twelve million a year to increase the business or is a business service production units. The money to start this business, only about one-third can be up to or from their own home, another to support from the state. Explain here, hardly money from banks, private social loan, the interest may be in the 30% level. Employment of low-income students, and I believe that under such great pressure on employment, as long as the opportunity to develop, this is a strong social and economic power. But how can the development of low-income problem is the economic foundation, the only country to support them. Through the transfer of capital 'pool' of the flow, the number of small business support.

Our country today, through the tax and the state-owned enterprises price fixing, the capital growth of the 'pond' transferred to the state, how the growth of capital 'pond', into the employment of the 'pond', planted the seeds of future economic development of the enterprise base to accommodate employment, training the majority of people purchasing power to support the sustainable development of small enterprise development, to accommodate a cycle of more employment is our capital 'pond', and Employment 'pool' of the country's economic orientation.