ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Will China Succeed in Internationalizing Its Currency?

Updated on February 8, 2020
Green currency in a dominant position until now, but China may succeed in expanding the deal with the "Renminbi" (AFP)
Green currency in a dominant position until now, but China may succeed in expanding the deal with the "Renminbi" (AFP)

For several years, China has been pursuing a separate currency to ensure its economic sovereignty. After the global financial crisis in 2008, the People's Bank of China signed bilateral currency exchange agreements (“Swap” agreements) with the European Central Bank, and with central banks in emerging countries such as Thailand, Nigeria, or Argentina, aimed at promoting diversification of international currency reserves, and the use of the Chinese currency on International domain. The adoption of the Renminbi internationalization strategy accelerated in the fall of 2013, with the establishment of the Shanghai Free Trade Area, which allows the free exchange of Chinese yuan and its use in trade exchanges, an initiative aimed at increasing its weight in the global monetary system. In October 2016, the yuan was recognized as the fifth global reserve currency. But a study issued on October 15 in the "Financial Times", based on the figures mentioned in the latest investigation by the Bank for International Settlements, indicated that 88% of the international exchanges are priced in dollars, while the share of the "RMB" did not exceed 4%. According to the International Monetary Fund, the latter represents only 2% of foreign exchange reserves.

This partial success is due, according to Jean-Raphael Charbonnier, an economist and researcher at the "Center of Asia", to the macroeconomic context of China, which prevailed for several years, and for a political reason as well. He argues, “It should be remembered that the United States has an open market, a strong currency, and a deficit in the economic balance. The balance of trade controls the supply and demand for foreign currencies, but the problem for China was its trade surplus, which, until 2008, represented 10% of its GDP. Although the decline in China's trade balance of operations to 1% brings it out of the net source position, this development has had only a limited impact on the Renminbi market. The American-Chinese trade tensions have halted the growth of that market, according to Charbonnay, who believes that «the Rimmenbay is of course linked to supply and demand, but it is already subject to the political factor. To obtain recognition of a new currency as a method of payment, its exchange rate must not be subject to fraud. Therefore, the most prominent players in the market assert that the strategy of the internationalization of the "Renminbi" will be effective only if the Chinese authorities stop controlling exchanges in this currency. According to the economist, and apart from the Chinese decision to seek to internationalize the “Yemeni” and the pricing that accompanied 2016 since more than 25% of Chinese trade in yuan, this strategy has shown its limits, because the Chinese are lending in dollars and borrowing this currency in the international market. "The Silk Road Economic and Strategic Project, which aims to link Europe, Asia, Africa and Australia, is funded in dollars first by the Exim Bank, Bank of China and China Development Bank, all of which contributed mainly to the investment and development projects included in this project," Charbonnier notes.

The green currency has been in a dominant position so far, but China may succeed in expanding trading with the "Renminbi" in the near future. In the short term, if US President Donald Trump succeeds in winning a second presidency, and the United States continues to use the dollar as a strategic weapon to defend its interests in the world, then we can, in the opinion of Jean Raphael Charbonnier, “think more seriously about the hypothesis of the dollar’s ​​decline because A political or geopolitical crisis erodes confidence in it as a currency. ” In the long run, experts estimate that two factors may lead to the end of the dollar's domination that has persisted since the end of World War II. On the one hand, the global needs for liquidity are increasing rapidly with increasing trade and international financial relations, especially in emerging Asia and Europe. On the other hand, the declining weight of the American economy will gradually lead to a re-balancing of the global monetary system based on several currencies.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://maven.io/company/pages/privacy

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)