Transcript of "Internationalization Of The Yuan Ki"
Internationalization of the Yuan <br />
History of the ‘Yuan’<br />The Renminbi is the<br /> official currency of the <br /> People’s Republic of China, and the Yuan the principle unit of it. <br />The Renminbi was issued by the People’s Republic of China in 1949 by the People’s Bank of China. <br />
Dollarization and Internationalization of the Yuan <br />US dollar has been <br /> the dominant currency. How has this affected the Yuan and its capacity to be an ‘international’ currency?<br />
What does ‘Internationalizing’ a currency actually mean?<br />What factors would have to be in place for a currency to be ‘international’ ? - demand- unit of account- store of value<br />
History of Yuan/Dollar Exchange Rates<br />Yuan has been pegged to the dollar since early 1960’s. <br />Exchange rate first at a rate of 2.46 Yuan/Dollar <br />July of 2005 – revolutionary change in Yuan as it was revalued by being fixed to a basket of currencies. <br />
Basket of Currencies <br />Dominant Currencies:- U.S. Dollar- Japanese Yen- Euro- Korean Won<br />Secondary Currencies:- Singapore Dollar- British Pound- Australian Dollar- Malaysian Ringgit- Thai Baht <br />
Benefits of Internationalization of the Yuan <br />Reduce exchange rates (for Chinese firms)<br />Strengthen competitiveness of Chinese Financial Institutions <br />Who would these benefit, and how?<br />
Current Situation Regarding Yuan <br />China is 2nd to the US as the world’s largest exporting nation – a result of which, the Yuan has developed into a major trading currency for surrounding Asian countries.<br />Programs to settle trade deals with HK and Macao made<br />Currency-swap agreements with Asian countries have been made<br />These factors highlight the importance of the Yuan in regionalization <br />
What more does China have to do to be an International Currency?<br />China would have to offer open transaction venues for foreign dealers<br />China’s capital markets would have to develop further<br />China’s openness is still restricted – this needs to change<br />China’s high transaction costs need to be reduced<br />And most importantly – free and full convertibility <br />
International Opinion on Internationalization of the Yuan <br />The U.S. would prefer this event not occur, as they would be at the losing end <br />To a layperson, travel and retail would be affected, with prices increasing for a large part of the world, and decreasing for China and certain Asian countries. <br />
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