A range of experts and politicians might be hoping for a larger international role of China’s currency, the yuan, but China’s leaders are in no hurry to do so, tells economic analyst Arthur Kroeber in the South China Morning Post.
The South China Morning Post:
Arthur Kroeber, Beijing-based managing director at specialist research house GK Dragonomics summed up China’s ambivalence to yuan internationalisation in a report last week.
“There is scant evidence that Beijing has much appetite for the risks and complications that come with a fully internationalised currency, let alone the even greater headaches that come with managing a global reserve currency,” he wrote.
Kroeber argues that far from displacing the dollar, the yuan will follow a path to internationalisation similar to that of the Japanese yen. With backing from the Japanese authorities that was at best half-hearted, in the 1970s and ’80s the yen captured a small share of trading in the international foreign exchange market and was used to settle a modest portion of Japan’s foreign trade (see the charts).
Given domestic resistance to financial reform, the yuan is unlikely to surpass the yen as an international currency in the near future. It could still become a significant invoicing currency for China’s trade, but as Kroeber writes, “it is hard to see how it can become more than a very second-rate reserve currency”.
- Surviving the next China bubble – Arthur Kroeber (chinaspeakersbureau.info)
- China will be a remote issue during the US elections – Arthur Kroeber (chinaspeakersbureau.info)
- Economy slows, but not falling off the cliff – Arthur Kroeber (chinaspeakersbureau.info)
- Most sought-after speakers February 2012 (chinaspeakersbureau.info)