Report: Chinese currency is going global

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Report: Chinese currency is going global

Post  Admin on Sun Aug 16, 2015 11:26 am

Image of Reuters - Arabian Eye
August 16, 2015 12:06

Direct: the company "Asia for investment," she said in its report this week, he said that China expresses its desire to go to the application based on the consumption pattern after decades of dependence on export revenues to invest locally and to achieve economic growth.

According to the report "directly" it received a copy of it, it and for China to see it applied a must-have to find an alternative source of funding, is to open up to foreign capital that would be a solution to this problem as it can achieve revenue from investors, instead of getting revenue exports.

This is the decision-making process in this regard are complex; they lead to the loss of a large share of China's control of its financial system, but has packed its decision after years of study in order to achieve the goal of making "renminbi" currency in circulation globally.

As part of this process, China has applied to join the SDR basket of currencies, which is the origin of international reserves developed by the International Monetary Fund; in order to complete the global liquidity and based on its value exclusively on the most actively traded of the US dollar, the European euro and the pound sterling and the Japanese yen the four currencies.

Are reviewed SDR currencies every five years, most recently in the current year .. However, the IMF sees that the postponement of the decision on the inclusion of the yuan in the SDR basket until next year allows more time for China to meet all the requirements.

If the inclusion of the Chinese currency, will increase demand and feel Investors and banks in maintaining security. While as investment managers "EXE" (AXA) flow of global reserves to the origins of the yuan by 10% (11.6 trillion dollars); or approximately ten times the amount for this year in case the currency to a basket of currencies included.

The "Asia to invest" in its report, that the last time a review of the SDR was in 2010 when the International Monetary Fund to reject China's demand for the inclusion of its currency in the SDR basket on the basis that the yuan was not capable of "free circulation".

The decision came as a result of the inability of the Chinese currency to meet the requirements of all the elements that make the currency used in the basket used freely without restrictions on its use, and of indicators and benchmarks the following four: annexation of the yuan to the currency reserves of foreign exchange by the central bank, the volume of international banking debts, The volume of international debt securities, and the level of trading and turnover of the yuan in the global forex markets.

Accordingly, Asia Investment Company pointed out that China has made efforts to integrate into the global financial system, especially after the relay in leadership in 2012.

The adopted measures include the development of the yuan to be the global currency trading, stock exchanges and the launch of linking Shanghai and Hong Kong program, and the establishment of free trade zones and expand the yuan trading range; which led to the increase in global trading of the renminbi.

The Chinese currency is currently the second most traded currency in trade finance, and fifth global payments immediately after the most actively traded listed in the SDR basket of four currencies, and fifth in the volume of international banking debts based on deposits abroad.

Although the "renminbi" is still a small coin, but it is witnessing encouraging progress based on other standards such as high-volume used for the issuance of international debt securities of less than 0.1% to 0.4% of the proportion of debt in the world within five years.

In terms of forex markets, the level of trading and turnover "renminbi" from 0.1% to 1.1% up, while "renminbi" failure in one indicator is the only foreign exchange reserves. Where central banks still prefer to keep other currencies in their vaults, but this trend is about to partly change as a result of the efforts already mentioned, it announced more than forty central banks for they were planning to retain, or already kept renminbi; anticipation of the inclusion of the Chinese currency in the basket Special Drawing Rights.

To this report Asia Investment Company believes that the process of internationalization of the Chinese currency came in very late in the decision-making stage.

This, praised the International Monetary Fund and the Group of Seven advanced economies (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) the evolution of the yuan, but they pointed out that China is not yet ready. Report Asia Investment Company also predicted that China poses additional liberal reforms in the coming months, as well as more efforts to move forward even if the International Monetary Fund refused to accept the "renminbi" in the SDR basket of currencies.

It was the latest step taken last week when China's central bank adopted a new procedure along with the prevailing exchange rate at the previous day's benchmark interest rate for the next day; resulting in lower value of the Chinese currency. Here should be on the willingness of international investors to enter the Chinese economy and Chinese investors receive in their various countries around the world soon.


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