© Yuqing Xing
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Following the interview with Roy Teo, FX Strategist at ABN Amro Bank NV in Singapore, Dukascopy asked Yuqing Xing, Professor of Economics at the GRIPS in Japan, to share his opinion on the Yuan internationalisation.
China is planning to extend the Yuan-denominated loans to BRICS in an attempt to boost trade between the leading emerging markets and promote the use of the Chinese currency. How would you evaluate this decision?
Providing Yuan-denominated loans to BRICS is a smart strategy to promote the internationalisation of the Chinese currency, the Yuan loans would be used to purchase Chinese products, thus enhancing China's exports to BRICS. On the other hand, to pay back the loans, BRICS should accept the Yuan as a trade settlement currency for their exports to China. In both way, the utilization of the "people's currency" will be expanded in international trade. Making the Yuan a major cross-border trade currency is the first step to develop the Yuan as s global reserve currency. If we believe that BRICS are the growth engines of the global economy in the 21 century, the acceptance of the Yuan as international trade settlement with BRICS will definitely enhance the status of the Chinese currency in the global economy.
Do you see any risks to the Dollar from China's efforts to encourage BRICS economies to extend the usage of the Yuan in international trade?
I believe that the US trade and fiscal deficits coupled with the ultra loose monetary policy represent the major risk of the US dollar. Like the EUR/USD, the confidence on the 17-nation currency has been tarnished by the European sovereign debt crisis rather than the strong Dollar. Chinese economy will grow up as big as the US by 2030, or earlier. The global economy will be significantly expanded with the sustained growth of emerging economies. It will be able to support three major reserve currencies. I do not think the status of the US dollar as a global currency will be undermined significantly by the rise of the Yuan. However, its relative importance will become lower, for sure.
Treasury Secretary Timothy Geithner said he was skeptical that the Yuan would soon become a world currency. Do you share Geithner's point of view?
I agree with Mr. Geitherner. If we use the US Dollar as a benchmark, it will take at least 10 years for the Yuan to be a global currency.