[Reader-list] China positions renminbi as the international currency of exchange

[Sarang Shidore]

"The bank estimated that Chinese gross domestic
product could hit $4,700bn this year, implying it could overtake Japan
as the world’s second-largest economy in 2010, while it was likely to
overtake Germany as the world’s second-largest trading country by the
end of the year." 

For nearly two thousand years before the advent of European (and North American) colonial
hegemony, the global trading powerhouses - with major trade
surpluses and trade volume - were historical India (i.e. modern South Asia) and China. In fact it has been estimated that between the 1st and 18th centuries, the Indian subcontinent and China together contributed an astounding 50-60% of the world's GDP. And then we had two simultaneous events - the European Enlightenment followed by the Industrial Revolution in the West, while Plassey and the Opium Wars sealed the fate of the East.

The
return of China to the center of global trade is only a long overdue correction,
returning to the historical reality that existed through most of urban
human history. A century from now we may conclude that the ~ 300 years of global European and North American supremacy was but an aberration in the global distribution of economic, political, and perhaps even cultural influence.

Sarang
----

China plans global role for renminbiBy Peter Garnham
Published: July 14 2009 20:00 | Last updated: July 14 2009 20:00Financial Times
China
has kick-started a major plan to internationalise the renminbi and the
process is likely to be faster than many expect, according to HSBC.If
successful, this could lead to nearly $2,000bn in annual trade flows,
or as much as 50 per cent of China’s total, being settled in renminbi
each year by 2012, compared with less than 10 per cent today.The move follows calls by China for the world to adopt a supranational currency to replace the dollar. “China
is beginning an ambitious scheme to raise the role of the renminbi in
international trade and finance and to reduce reliance on the US
dollar,” said Qu Hongbin, China chief economist at HSBC. “This will likely be a multi-year and gradual process. Yet, we believe the pace is likely to be faster than many expect.”HSBC
said the internationalisation of the renminbi was long overdue, given
China’s rising economic power relative to the limited use of the
renminbi overseas.The bank estimated that Chinese gross domestic
product could hit $4,700bn this year, implying it could overtake Japan
as the world’s second-largest economy in 2010, while it was likely to
overtake Germany as the world’s second-largest trading country by the
end of the year. China announced a pilot programme last week
that expanded renminbi settlement agreements between Hong Kong and five
major trading cities, including Guangzhou and Shanghai.
Furthermore, this year the People’s Bank of China has signed a
total of Rmb650bn ($95bn) in bilateral currency swap agreements with
six central banks: South Korea, Hong Kong, Malaysia, Indonesia, Belarus
and Argentina.HSBC said China was still in talks with other
central banks to form additional swap agreements and was likely to
expand them to cover all the country’s trade with Asia, excluding
Japan. This would be followed by an expansion to take in other
emerging countries, including those in the Middle East and Latin
America, that needed renminbi to pay for their imports of Chinese
manufactured goods.“More than half of China’s total trade flows,
primarily bilateral trade with emerging market countries, are likely to
be settled in renminbi in the next three to five years,” said Mr Qu.
“This means that nearly $2,000bn worth of cross-border trade flows
would be settled in renminbi, making it one of the top three currencies
used in global trade.”