Thursday, March 3, 2011

Yuan an Alternative?

The factors that long ago made
US dollars the means of world trade
May soon usher in the
Yuan (or renminbi)
For cross-border bills to be paid.  

China's currency may soon become a medium of regional if not global trade, writes Barry Eichengreen in the Wall Street Journal.  He argues that three factors led to the dollar's heretofore exclusive role: the depth of US securities markets (including Treasuries as well as the instruments for hedging risk); safety, particularly in times of international crisis; and the lack of alternatives.  China's growth may soon bring it the first two attributes, while making the third irrelevant.  The Euro, meanwhile, is even closer to becoming a dollar alternative.

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