Friday, March 9, 2012

China's currency getting global

China: RMB credits for the Brics

China Development Bank’s initiative in bringing together the development finance arms of the five major Brics countries to sign an agreement – whereby each bank pledges to extend credit in its own currency to the four others – in Delhi later this month speaks volumes about the ambitions of the mainland policy bank.
China’s export of cheap capital is giving it increasing clout and the country is using it to press for a greater role for the renminbi, particularly in financing trade but not exclusively so. Generally, to denominate trade in your home currency is a huge advantage because it forces others to take the risk of adverse currency moves. The Chinese banks and regulators have long been concerned that the trajectory of the dollar is down and worry about being repaid in ever less valuable dollars.
Comment: This bodes ill for the dollar. China's leadership is adamant in its pursuit of global power status. Yet China's strategy is fundamentall contradictory. China cannot continue to grow and remain authoritarian at the same time.

No comments:

Post a Comment