Some experts have talked about the possibility of China’s yuan one day becoming the world’s primary reserve currency. While no one expects that to happen anytime soon, the yuan is slowly turning into a global currency, as China’s government loosens controls on its use, The New York Times reports.
“The RMB (renminbi – another name for the currency) is likely to become a reserve currency in the future, even if the government of China does nothing about it,” Nobel laureate economist Robert Mundell of Columbia University tells the Times.
|A Chinese bank clerk counts yuan notes.
The renminbi already functions as a regional currency in Southeast Asia, thanks to China’s close economic ties to many countries in the region.
China’s government has started to ease its stringent currency restrictions during the past year. U.S. companies such as McDonald’s and Caterpillar have been allowed to issue yuan-denominated bonds in Hong Kong to fund their operation in China, for example.
And the yuan can now be used to settle some of China’s trade with Russia, Vietnam and Thailand.
As for the United States, the stronger yuan sought by Democrats and Republicans won’t do much to shrink the huge U.S. trade gap with China, says Shaun Rein, managing director of the China Market Research Group.
“More than 70 percent of big American multinationals operating in China told my firm they did not want the renminbi to appreciate too much because it will cut into their profits,” he writes on CNBC.com.
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