*****China Openly Calls For New Global Reserve Currency*****

China Daily reports that China calls for new global reserve currency.

(emphasis mine) [my comment]

Top banker proposes setting new global reserve currency
(Xinhua)
Updated: 2009-03-24 14:03

BEIJING --
Zhou Xiaochuan, governor of China's central bank, has proposed to create a super-sovereign reserve currency as part of reform in the international monetary system.

The desirable goal of the international monetary system is to "create
an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies," he said.

Zhou said the Special Drawing Right (SDR) of the International Monetary Fund (IMF) has the potential to act as a super-sovereign reserve currency in a signed article posted on the website of the People's Bank of China Monday.

The SDR is an international reserve asset created by the IMF in 1969.

The ongoing financial crisis is a testimony to the inherent deficiencies of current monetary system of the world, he said.

He admitted the creation of a new reserve currency is a long-term goal that requires foresight and courage from state leaders of various countries.

"In the short term, monitoring, evaluation, and early warning mechanisms should be strengthened against risks of the current system on condition that the international community, especially the IMF, acknowledges such risks," he added.

Zhou's remarks came ahead of the G20 summit slated to start in London on April 2, when leaders across the world and large international organizations like the IMF are expected to discuss reforming of the international monetary and financial system in light of the current crisis.

Last week, Russia announced a similar call for the introduction of a super-national reserve currency as part of the country's proposal to reform the international monetary and financial system at the upcoming London summit.

Bloomberg reports that China's calls for 'super currency' shows dollar concern.

China 'Super Currency' Call Shows Dollar Concern
By Li Yanping

March 24 (Bloomberg) -- China's call for a new international reserve currency may signal its concern at the dollar's weakness and ambitions for a leadership role at next week's Group of 20 summit, economists said.

Central bank Governor Zhou Xiaochuan yesterday urged the International Monetary Fund to create a "super-sovereign reserve currency." The dollar weakened after the Federal Reserve said it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets.

"China is concerned about the potential for a slide in the dollar as the U.S. attempts to stimulate its economy," said Mark Williams, a London-based economist at Capital Economics Ltd. The "rare" sight of a Chinese official attempting to reframe an international debate may be "a sign of China becoming more engaged," he said.

Zhou's comments may also signal ambitions for the yuan to play a bigger global role. The central bank this week signed a currency swap with Indonesia, adding to agreements since December with South Korea, Hong Kong, Malaysia and Belarus [Currency swaps allow these central banks to use the yuan as a foreign reserve]. It's also preparing for trade settlement in the Chinese currency with Hong Kong, Macau and the Association of Southeast Asian Nations.

"There is concern and even frustration among top policymakers in Beijing about China's high exposure to U.S. dollar-denominated financial assets," said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong.

Yuan forwards rose the most in three months with traders betting on appreciation for the first time since September on speculation that the U.S. policies will weaken the dollar. The 12-month forward rate gained 0.9 percent.

Support for Dollar

U.S. policy makers testifying before lawmakers in Washington today affirmed their support for the dollar.

Treasury Secretary Timothy Geithner, asked at a House Financial Services Committee hearing whether he rejected moving toward a global currency, replied, "I would, yes."

"I would also," said Federal Reserve Chairman Ben S. Bernanke. The question was asked by Representative Michele Bachmann, a Minnesota Republican.

Premier Wen Jiabao called on March 13 for the U.S. "to guarantee the safety of China's assets." China's Treasury holdings climbed 46 percent in 2008 and now stand at about $740 billion, according to U.S. government data. The nation is the biggest holder of U.S. debt.

Raising Yuan's Status

China is promoting use of the yuan to smooth currency volatility and to serve "a long-standing interest" to raise its status to that of a global reserve currency, said Ben Simpfendorfer, an economist at Royal Bank of Scotland Group Plc in Hong Kong. Such moves are not "a knee-jerk response" to the economic crisis, he said.

"If turning the Chinese yuan into a global reserve currency sounds ambitious, then encouraging its adoption as a regional reserve currency is more straightforward," said Simpfendorfer.

G-20 leaders will gather in London on April 2 to forge a common response to the financial crisis that has spawned a global recession. The summit will di scuss proposals for reforms of the International Monetary Fund.

Flexing 'Some Muscle'

The timing of Zhou's proposal is "the latest example of China's policy of neo-assertiveness in world affairs," said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. "China is starting to flex some muscle and generally steer the debate in China's own direction."

Zhou's article highlighted the "dilemma" that countries issuing reserve currencies face in balancing their own monetary-policy goals with other nations' demand for their money.

The global crisis raised the question of which reserve currency would secure "global financial stability and facilitate world economic growth," Zhou said. He proposed expanding the use of the IMF's Special Drawing Rights, which are currency units valued against a composite of currencies.

"The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies, and gross domestic product may also be included as a weighting," said Zhou.

Some economists back his case.

"The world economic landscape has been changed since the establishment of the SDR 40 years ago," said Ha Jiming, chief economist at China International Capital Corp. in Hong Kong. "Specifically, no such reserve currency would make sense without the yuan being included."

China Daily reports that China's capital account norms may be eased.

Capital account norms may be eased
By Wang Bo (China Daily)
Updated: 2009-03-14 14:02

China will continue to open up its financial sector this year despite the challenges in the international financial market, the nation's central bank said on Friday.

In its 2008 international financial market report, the People's Bank of China, the central bank, said that as long as the risk is controllable, it would gradually relax the restriction on capital account deals, and continue to work towards the full convertibility of the yuan. [more evidence that China is moving to quickly make yuan an international currency]

My reaction: China is now openly calling for a new reserve currency! This is a major development which more or less seals the dollar's fate.

1) Central bank Governor Zhou Xiaochuan yesterday urged the International Monetary Fund to create a "super-sovereign reserve currency."

2) China's call for a new international reserve currency signals its concern at the dollar's weakness and ambitions for a leadership role at next week's Group of 20 summit.

3) Last week, Russia announced a similar call for the introduction of a super-national reserve currency

4) The Chinese central bank this week signed a currency swap with Indonesia, adding to agreements since December with South Korea, Hong Kong, Malaysia and Belarus.

5) China continues to gradually relax the restriction on capital account deals and work towards the full convertibility of the yuan.


Conclusion: Last December, China announced its decision to make the Yuan an international currency. To this end it has

A) Signed agreements to settlement trades in yuan with neighboring countries including Russia, Mongolia, Vietnam and Myanmar, Hong Kong, etc...
B) Signed currency swap agreements with Indonesia, South Korea, Hong Kong, Malaysia and Belarus.
C) Relaxed the restriction on capital account deals and worked towards the full convertibility of the yuan.
D) Called for a "super-sovereign reserve currency" and taken an active leadership role ahead of next week's Group of 20 summit

At the pace which developments are moving, the framework for a new international currency could be in place by year end. This new international currency would be created using the Special Drawing Right (SDR) of the International Monetary Fund (IMF) and would be backed by the currencies of the world's major economic powerhouses including the yuan and the euro. Given concerns with the fed's money creation, it is possible and likely that dollar backing is ultimately excluded from this future international currency.


Below are my past entries on the Yuan's slow progress towards becoming an international currency.

China, Russia rethinking the dollar's status

China nervous about its treasury holdings

Chinese Political Advisors Propose Speeding Up Reforms To Make Yuan An International Currency

Bank of China primes for yuan settlement

Rise of the renminbi as a global currency

*****Chinese Authorities Are Accelerating Efforts To Make Yuan An International Currency*****

Yuan-settlement test to start

Chinese central bank: "The US dollar is unlikely to be stable next year"

*****China makes Yuan an international currency*****


This entry was posted in China, Currency_Collapse, News_Developments, Russia. Bookmark the permalink.

13 Responses to *****China Openly Calls For New Global Reserve Currency*****

  1. zhou chun xiao says:

    Gt. post.
    'what can be nicer than. . .
    guests/friends from afar arriving?"
    "the T.a.o. that can be
    enumerated is the the real One."
    Ceri autos on sale now 2 for 1
    in Shang hai. Get sil suit of
    clothes made while you shop for
    autos, AWACs, genuine leater
    imitation hand bags, etc. Chao!
    (fan?)

  2. Where can we buy Renminbi? Seriously.

  3. Troy says:

    Hakuna Matata said...
    Where can we buy Renminbi? Seriously.

    Great question.
    I am interested in whether the renmimbi will be included in the currency basket along with the dollar, pound, euro, and yen.

    http://wereallfullofbull.blogspot.com

  4. Anonymous says:

    HM: I know where I live, you can buy Renminbi Yuan at most of the foriegn currency/bullion shops around the city.

  5. Anonymous says:

    i think you have it all wrong. I do not see any of the currencies becoming part of the new international currency. All central banks are in collusion of some sort, and are integrated more than we care to realize. A single (new) international currency is the goal. How better to control both the financial system globally, and all state economies?

    A solution to the issues faced by the world (food, water, poverty, medical care, housing, war) will never be address on a logical and intelligent basis as long as there are a few who seek ultimate control. Their motives need to be questioned based on their track record. They create a perception of life that is our living reality. This world is horribly flawed and priorities are obnoxiously turned on their head. How can any man or woman desire to have the same leaders who have left this world in such despair, and that despair has occurred time and time again over the centuries, thanks to the same bloodlines that control us today.

    We are manipulated unconsciously on a daily basis, a good example being the call for a new reserve currency. This is no different than the wasteful energy and resources to address global warming (which ultimately leads to more burdensome taxation and further control of our lives). IMO, nothing will be solved until the focus is placed on those individuals and institutions that have manipulated economies, sentiment and resources.

    A new reserve currency is no different than proposing new regulations for the faux capitalist bankers. Society will not evolve to a more intelligent and compassionate one. Capitalism is a flawed model that benefits those that claim superiority to competition whether through fraud, deceit, greed or intimidation. Those in control now will be in control again. And history will repeat itself again in another 80 years.

    Now when you are done worrying about global warming, you may begin worrying the impacts of the USD losing reserve currency status. I'm sure much of your time and talents will be wasted while those in the backroom carry out their agenda according to plan, without any sort of resistance or transparency.

  6. Who are they?
    Are they Neanderthals that we did not exterminate ~20K years ago?
    Should we make DNA mapping compulsory for all key government and financial figures?

  7. Mudar says:

    Dear Eric;

    Though you seem to be beyond busy… following, searching and researching on the global economical news… thankfully providing us with great insights & knowledge. I would like to hear from you on the relation between what could be coming as stated in this article to gold prices, along the relation of issuing (SDR’s) and its affect on gold. Am also attaching hereunder a link to an article that can give some idea on this matter (SDR allocation and the price of Gold):

    http://www.gold-eagle.com/editorials_01/walker110901.html

    Hoping to hear your thoughts on the above SOON ?

    Many thanks

    Mudar Dudin

  8. occdude says:

    China seems to be timidly looking for an alternative currency. They may be exploring options with their currency the Yuan, but I think they're politically realistic enough to realize that the world wants an international currency not dominated by one particular country at the expense of the others.

    Their solution is the IMFs SDR which can act as a proxy for the dollar until a more stable medium can be adopted and agreed upon by a consortium of large exporting nations.

    You have to keep one thing in mind with the Chines and that is subtlety. The Chinese will move very quietly. If they whisper its the same as a roar, if they roar they've already made their move and they're BSing you. Believe me, pay attention to these guys, they will astound you with their ability to make moves unnoticed and surprise you.

    The dollar has a target on its back and I don't see the other nations of the world sitting back while we flagrantly debase it.

    It's over folks. The rest of the world thats not so F'd up is going to raise their standard of living and ours will lower (unless you move).

  9. occdude says:

    Very interesting reading about the IMFs SDR which China is proposing as a new currency vehicle.

    http://www.imf.org/external/np/exr/facts/sdr.HTM

  10. Anonymous says:

    well hakuna...maybe you should find out for yourself.

    Sheeple -1

  11. They abandoned US ponzi playground and are moving to the multipolar model. Recent Fed actions confirm that US finslaves acknowledge the introduction of new global currency and just want get some loose change from that. The swarm has began.

  12. Anonymous says:

    Dear american citizens, you should not worry...

    The US government would enter into a new world war rather than allow the substitution of dollar as world reserve currency.

    Indeed, if anything such would be allowed to happen, the last modern empire (like the roman or mongolian many centuries before) would come to an end. As long as oil is payed in dollars and as long as there is plenty of weapon of mass destruction, the major armed force in the world would never allow it to happen.

  13. Dr.Zhou (xiao-chundaole) says:

    ATM?
    You can buy Geli / cheri autos
    s.hai with panda coins. SW fracs.
    Drop by intnat. clinic for a
    by pass op pay in pandas plz.
    BTW, is Dr. Zhou (surname).
    ....en lai?

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