When Will The International Currency Yuan

"We are cautious about the concept of so-called internationalization of the renminbi," Guo Qingping, Deputy Governor of Central Bank of China.

Like any maturing process in China, beyond the existing target by imposing new currency as an international currency, both political and economic interest, they understand that it will take time and that it must meet certain conditions. It is not just a matter of desire, must also be a matter of capacity. In this sense, the yuan has potentially everything to prevail in a few years as a global currency, even (and most likely) to displace regional yen of his reign.

While the yuan is preparing to establish itself as an international currency in the immediate future in regard to the relationship with the U.S. dollar, analysts believe, according to the Internet Information Center China, that the exchange rate have little pressure the assessment as the U.S. economy remains weak. Since the market is perceived that the yuan will continue trading in a narrow band, which currently has at its center at 6.83 Chinese currency units per U.S. dollar and by virtue of the weakening U.S. currency has been observed against other major currencies implies a weakening of the yuan also with the consequent threat to the bilateral trade balance against China for the major economies.

"The fact that an international currency is made does not depend on a particular country, but the market" Guo Qingping considered. In China it is known that to achieve the objective of internationalizing the yuan, it should make it attractive and necessary conditions exist. Although not its color, the yuan is still green enough to be an international currency.

But despite the yuan still requires time to mature, and several economies have begun to incorporate it as an international reserve currency, and some even agreed to use the yuan in bilateral trade with China. The risk that arises in this sense is linked to the decision to incorporate highly overrepresented within the Chinese currency composition of reserves and bet on a currency that does not respond to market forces and despite being backed by a strong growing economy, has several elements of fragility.

Considering the importance of China as seeking raw materials and thinking ahead, there are many who see the dollar lose prominence in the trade of commodities and the yuan as currency in future participate in trade in commodities. In fact, the Chinese government itself had raised in March, the idea that the dollar is replaced as the world's reserve unit.

For Mark Mobius, who heads the Templeton Emerging Markets Group Asset Management: "Yes, raw materials could be denominated in other currencies. This is already beginning. " Fund managers are supporting the yuan to name the price of raw materials because, as mentioned, China is the world's largest consumer of them.

The yuan broke through the global currency, that can not be denied. But for the Chinese currency may charge a prominent role as an international currency must be freely negotiable, possible that at this time does not seem in the minds of the rulers of China. The importance of sustaining a competitive exchange rate to make exports for growth, (where the U.S. appears as a major destination), maintains the desire to continue with the intervention in the foreign exchange market to prevent appreciation of natural the Chinese currency.

And when you reach the stage of negotiating liberalization of the Chinese currency (to be produced by China's interest and not for U.S. pressure for that to happen), we should not imagine that this will happen without maintaining some degree intervention. This liberalization will be clearly and predictably gradual. Consider just what might happen if the decision to fully liberalize the yuan, compared with China's strong external surplus. This would generate a sharp appreciation of the currency reinforced by speculative actions of investors who would bet in that regard, which would impact heavily on the export dynamics and consequently on economic growth over the difficulties of immediate replacement of foreign demand for domestic demand . This undoubtedly is highly dangerous for an economy must grow at least 8% to prevent absorption problems of the labor force that is permanently integrated into the market, might affect political stability.

What can we expect then about the future of the yuan in the international context? As seen in the actions taken by the Chinese government, we can expect a slow but continuous advance of China's currency to position itself as an international currency.

John Paul Cardinal of The Economist, he realized the start on 28 September, the "" Long March "to dethrone the dollar, the day that the Chinese government plans for the first time, the issuance of bonds in Hong Kong RMB-denominated sovereign worth U.S. $ 878.5 million. Even the Ministry of Finance of China, Xie Xuren, considers the event as a decisive step towards internationalizing the status of the yuan, while the momentum to strengthen Hong Kong as an international financial center.

In recent months it has agreed with the Central Banks of Argentina, South Korea, Malaysia, Hong Kong, Belarus and Indonesia formalizing exchange swap to enable those countries to pay their imports from China in yuan. It has also started to gradually reduce its holdings of Treasuries United States, but such withdrawal can not be violent.

Thus, the yuan moves and each time increasing its international presence, while very few ask Is it a good decision to accept the yuan as an international currency or will be taking a risk to the stability of economies?