Francesco Sisci: The Yuan Lies in Waiting

From Asia Times:

Pundits in China are scratching their heads over the future of their currency, the yuan, which has been brought to the fore by the present financial crisis. Their thinking has recently become urgent, compared with previous perceptions that the yuan could be kept not fully convertible – and thus shielded from foreign interference – for many years.

Certainly, there will be no problem if the US economy recovers soon and the dollar makes a robust comeback as the world currency. In that case, the yuan can continue to piggyback on the dollar, or with the exchange rate slowly and steadily crawling upward according to the necessities of trade.

Yet, what if the US economy and its dollar do not come back? David Goldman (also know as ATol’s Spengler) already made this suggestion: “I believe that China and other Asian countries will decouple from the United States during the next five years, partly because the American economy will remain moribund, partly because American policy will continue to be incompetent, and partly because their own domestic market and financial systems will be able to bear the burden.” [1]

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