Internationalization of the RMB to be accelerated – Hu Zuliu
From The People’s Daily:
It is an indisputable fact that China has become the world’s major economic power. Based on market exchange rates, the size of China’s overall economy is already the world’s fourth largest, accounting for one sixth of the US economy and one second to two third of Japan’s economy. If calculated in accordance with the actual purchasing power of RMB, China has already become the world’s second largest economy. However, it is also undeniable that China’s currency monetary system does not match the scale of its economy. The internationalization of the RMB is an issue which has not been taken seriously enough and needs a quick resolution.
The RMB is not an international currency. This is most apparent when considering how very little international trade was conducted in RMB (mainly in Hong Kong and neighboring countries in South Asia). Although the central bank recently approved IFC and the Asian Development Bank to issue bonds in Yuan, the volume of debt circulated in the valuation of the RMB in the international financial market is zero. The volume of RMB assets held by the world’s financial institutions ¬®C including the national debt carried by central banks ¬®C is also zero. All these are disproportionate to China’s status as an economic power.
Countries with a bigger economic scale than China ¬®C such as the United States, Japan and Germany ¬®C all have internationalized currency.
There are benefits to a country when its currency is internationalized: it will be able to issue financial instruments for the valuation of its currency which create a financing tool for crisis prevention for the enterprises in the country. [Full Text]