Chinese authorities are accelerating efforts to make yuan an international currency

[not.your.average.joe]

http://www.marketskeptics.com/2009/01/china-expanding-yuan-settlement-trials.html

Shanghai may start yuan settlement trials
By Zhou Yan
2009-01-23

Shanghai will likely join the second batch of yuan-settlement trials with some neighboring trade partners to tackle the export slowdown, according to local authorities.

"We worked on the proposal for the pilot program with related departments which would be submitted to the local government and the State Council for approval," said Zhao Kangmei, vice-chairman of Shanghai Municipal Commission of Commerce (SMCC).

The State Council, the country's cabinet, last December announced it would use the Chinese currency yuan for trade payments between Guangdong province and the Yangtze River Delta and the special administrative regions of Hong Kong and Macao, an attempt to make yuan an international currency.

Continue reading @ http://www.marketskeptics.com/2009/01/china-expanding-yuan-settlement-trials.html

 

[TER]

Bad news for those FRNs.

 

[slacker921]

how will that affect the Hong Kong Dollar? ...

 

[not.your.average.joe]

how will that affect the Hong Kong Dollar? ...

Well, i will say i am not in any position to give advice on this i will give you might best guess since i posted the article.

If they folow suite and de-peg from the dollar and make the change to having reserves in yuan, i would say the effects would be minimal. There might be an adjustment initially, but i couldnt tell ya if it would be + or - for the hong kong dollar itself. It would probably depend on how they tackle the issue of exiting the dollar and entering the yuan, along with other nations as well.

If they stay pegged to the dollar i cant see how that would be positive for them. I guess I dont see that happening.

There will be instability across the board for a time, i would guess, as other nations would have to adjust to the U.S. not being the 'economic center of the world' any longer.

I am hoping some other great economic minds could respond to the article explaing how all of this would happen.

 

[hugolp]

Bad news for those FRNs.

Yes. I think this is the real danger for the USA bubble economy.

Hugo

 

[VIDEODROME]

would it be a good idea to convert a few FRNs to Yuons ?

 

[emazur]

I read an article yesterday entitled "Calling China's Bluff":
http://www.foreignpolicy.com/story/cms.php?story_id=4646

In regards to making the yuan an international currency:
In fact, it is China's tight monetary control that keeps this option from enticing international investors. The absence of secure property rights and trustworthy legal infrastructure act as disincentives for foreigners to use the renminbi more widely. Likewise, China's capital controls and the limitations of its domestic financial markets inhibit the Chinese financial system from challenging the enduring centrality of the dollar and U.S. financial markets -- even with their current difficulties. Although China's potential as an industrial leader is certainly advanced, its capacity to emerge as a global monetary power is still in the offing.

In regards to the T-bill bubble:
China risks the same fate. Between 70 and 80 percent of its reserves are in dollars. For every 10 percent depreciation of the dollar, China's reserve holdings lose the equivalent of 3 percent of the country's GDP. As a creditor state, China has thus acquired strong incentives to defend the U.S. dollar -- buying up more Treasury bonds to keep its value strong in a fall.

I'm not saying a necessarily agree with those arguments, I'm just pointing them out. But for the second point, wouldn't an easy solution be for China to buy up gold/silver/hard assets/other foreign currencies with all the extra dollars they have lying around?

 

[hugolp]

I read an article yesterday entitled "Calling China's Bluff":
http://www.foreignpolicy.com/story/cms.php?story_id=4646

In regards to making the yuan an international currency:
In fact, it is China's tight monetary control that keeps this option from enticing international investors. The absence of secure property rights and trustworthy legal infrastructure act as disincentives for foreigners to use the renminbi more widely. Likewise, China's capital controls and the limitations of its domestic financial markets inhibit the Chinese financial system from challenging the enduring centrality of the dollar and U.S. financial markets -- even with their current difficulties. Although China's potential as an industrial leader is certainly advanced, its capacity to emerge as a global monetary power is still in the offing.

He is right, but what he doesnt say is that China can change its own laws.

In regards to the T-bill bubble:
China risks the same fate. Between 70 and 80 percent of its reserves are in dollars. For every 10 percent depreciation of the dollar, China's reserve holdings lose the equivalent of 3 percent of the country's GDP. As a creditor state, China has thus acquired strong incentives to defend the U.S. dollar -- buying up more Treasury bonds to keep its value strong in a fall.

I'm not saying a necessarily agree with those arguments, I'm just pointing them out. But for the second point, wouldn't an easy solution be for China to buy up gold/silver/hard assets/other foreign currencies with all the extra dollars they have lying around?

With his second argument I disagree strongly. China interest is not to keep the dollar strong but to get out of the dollar with the minimum loss. As long as the present situation contiunues China is in the hands of the USA monetary policy and that is a disaster for them.

There was the rumor about China buying a lot of gold.

Hugo

 

[not.your.average.joe]

also this article from awhile back

Gulf Arab Nations break their dollar pegs

http://www.marketskeptics.com/2009/01/gulf-arab-nations-break-their-dollar.html


Intro:
Gulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.

Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.

 

[hugolp]

Gulf Arab Nations break their dollar pegs

http://www.marketskeptics.com/2009/01/gulf-arab-nations-break-their-dollar.html


Intro:
Gulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.

Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.

Woaw! For me, this kills the dollar. And they are saying that the new currency will be backed by gold.

Get ready because things are going to get interesting.

 

[not.your.average.joe]

Yes, this will help Peter Schiff's predictions come to fruition, i believe. Ol Mish might have declared victory a little early (well that is obvious i guess).