Posted on 06/07/2009 11:57:26 PM PDT by bruinbirdman
Guo Shuqing, chairman of China Construction Bank, said his bank, the second largest in China, was exploring offering renminbi-denominated trade finance credit that could make the Chinese currency more widely used internationally.
His voice, the first from the head of a large Chinese bank, joins a chorus from senior government officials on currency matters that together reflect concerns about the stability of the US dollar and several efforts to promote the use of the renminbi more widely.
On the eve of the G20 meeting about two months ago, Zhou Xiaochuan, head of the People’s Bank of China – China’s central bank – published a paper proposing to replace the dollar with an international reserve currency and expanding the use of special drawing rights, a unit of account of the International Monetary Fund.
Mr Zhou’s proposal came after Wen Jiabao, premier, called on the US to guarantee the safety of dollar-denominated Chinese assets. About 70 per cent of the $2,000bn or so in Chinese reserves are in dollar-denominated assets.
In addition, the Chinese have negotiated a series of currency swap arrangements with seven countries – including, most recently, Argentina – which would allow these trade counterparties to settle some trading bills in renminbi. China has agreements with other countries, including Iran, to not use the dollar in their trade.
While most developments have been theoretical, Mr Guo said he was in talks with the PBoC and others to develop the concept.
The Chinese desire to diversify away from the dollar comes as many oil exporters have expressed a similar wish. Venezuela has frequently complained about the dollar and last year Kuwait abandoned its currency peg with the dollar.
Bloomberg: BRICs Add $60 Billion Reserves as Zhou Derides Dollar
“Mr Zhou’s proposal came after Wen Jiabao, premier, called on the US to guarantee the safety of dollar-denominated Chinese assets.”
This is the craziest thing the Chinese have ‘demanded’ in quite a while. The dollar isn’t going to be disappearing any time fast. If people keep hand-wringing over every little move, and tying it back to comments made months ago this way, they’re going to age a year every week. People are going to try to find ways to diversify away from the dollar. If they do it in a way least harmful to themselves, it’ll be good news for them and good news for America. It’s not going to signal the end of the dollar, though in the long run it may no longer be “the” reserve currency but “a” reserve currecy (and there will be no “the” reserve currency).
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