Wednesday, 3 August 2011

China: In 2020 the US$ will still be on top and the Yuan account for no more than 5% of global reserves.

BEIJING, Aug 3 (Reuters) - The yuan may only account for 3 to 5 percent of global reserve currencies a decade from now, an advisor to China's central bank said on Wednesday.   Xia Bin, an academic member on the monetary policy committee of the People's Bank of China, said the dollar would remain an important reserve currency for a long time yet.
Xia Bin
     This is one of several voices from China. From the BBC yesterday: "I think the US debt crisis adds new urgency to the Chinese government's efforts to promote the yuan as an international currency," (said) Zhang Ming, a Beijing-based scholar at the Chinese Academy of Social Science.

     One benefit of being the reserve currency is seigniorage. (Wikipedia: "A very profitable type of seignorage is from the international circulation of banknotes. While the cost of printing banknotes is minimal, the foreign entity must provide goods and services at the face value of the note to obtain it".)

Added: “The idea of a reserve currency is that it is built on strength, not typically that it is ‘best among poor choices’,” page 35 of presentation made by one committee member (of the US Treasury Borrowing Advisory Committee) said. “The fact that there are not currently viable alternatives to the U.S. dollar is a hollow victory and perhaps portends a deteriorating fate.”

Added: From Xinhua Agency:  For the US "To eat May's grain in April", taking on new loans to repay the old ones, will never be a permanent solution.

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