The Chinese do not plan to live in a world dominated by the U.S. dollar for much longer. Chinese leaders have been calling for the U.S. dollar to be replaced as the primary global reserve currency for a long time, but up until now they have never been very specific about what they would put in place of it. Many have assumed that the Chinese simply wanted some new international currency to be created. But what if that is not what the Chinese had in mind?
When I arrived to Bangkok the other day, coming down the motorway from the airport I saw a huge billboard—and it floored me.The billboard was from the Bank of China. It said: “RMB: New Choice; The World Currency”Given that the Bank of China is more than 70% owned by the government of the People’s Republic of China, I find this very significant.It means that China is literally advertising its currency overseas,and it’s making sure that everyone landing at one of the world’s busiest airports sees it. They know that the future belongs to them and they’re flaunting it.
And most everyone has assumed that Chinese currency would soon play a larger role in international trade.
The tightly controlled Chinese yuan will eventually supersede the dollar as the top international reserve currency, according to a new poll of institutional investors.The survey of 200 institutional investors – 100 headquartered in mainland China and 100 outside of it – published by State Street and the Economist Intelligence Unit on Thursday found 53 percent of investors think the renminbi will surpass the U.S. dollar as the world’s major reserve currency.Optimism was higher within China, where 62 percent said they saw a redback world on the horizon, compared with 43 percent outside China.
China’s yuan broke into the top five as a world payment currency in November, overtaking the Canadian dollar and the Australian dollar, global transaction services organization SWIFT said on Wednesday.
Alan Greenspan, who served at the helm of the Federal Reserve for nearly two decades, recently penned an op-ed for the Council on Foreign Relations discussing gold and its possible role in China, the world’s second-largest economy. He notes that if China converted only a “relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system.”
We are only two months into 2015, and it has already proven to be the most volatile year for the economic environment since 2008-2009. We have seen oil markets collapsing by about 50 percent in the span of a few months (just as the Federal Reserve announced the end of QE3, indicating fiat money was used to hide falling demand), the Baltic Dry Index losing 30 percent since the beginning of the year, the Swiss currency surprise, the Greeks threatening EU exit (and now Greek citizens threatening violent protests with the new four-month can-kicking deal), and the effects of the nine-month-long West Coast port strike not yet quantified. This is not just a fleeting expression of a negative first quarter; it is a sign of things to come.
The euro last stood at $1.1072, off 0.90 percent for the day and below a key support level, Sutton said. It fell to as little as $1.1066, which was the lowest level for the euro against the dollar since September 2003, according to Thomson Reuters data.The euro also declined to one-month lows against the Japanese yen, which was flat against the dollar at 119.72 yen to the dollar.