China, Yuan And The ASEAN
It is quite obvious that China is trying to push yuan to the status of an international currency in the current Asean meet. Trying to exploit the uncertain nature of the US Dollar, which is anomalously volatile over the past couple of years, China is pitching for reduced dependence on it. By luring the member-countries of the Asean with a large financial support, China aims at taking yuan to the dream status of international currency so that it will reap rich benefits with enlarged regional trade.
China and Japan are offering together to contribute nearly $80 billion economic stimulus package for the member nations of Asean to reduce their dependence on IMF. The China-Asean Free Trade Agreement (CAFTA) is becoming operational from January 1 of 2010 and you can see wide scale use of renminbi or yuan as the regional currency.
Already China is pushing Asean member nations to enter into bilateral trade agreements and settlements in yuan. Laos and Vietnam are the first two nations of Asean who have succumbed to China's insistence.
China succeeded in launching its first international bond in renminbi in the Hong Kong market very recently and it is adopting a clever strategy of offering easy loans to Asean nations like Indonesia and Pakistan to push them to transact in yuan. Thailand is almost all set to use yuan as a medium of exchange.
China’s aim to make yuan as an international currency will give it many benefits. Its exports as well as prestige will get a tremendous boost. China can argue strongly with the United States and other western countries that there is no base in their accusation that yuan is being kept under strict official control.
Though the prevailing situation is that only 10% of China-Asean trade involves yuan, China has set its eyes on a very higher goal and it is abundantly clear that China will not spare any efforts in taking forward its audacious proposal of making yuan as an international currency.
