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It is the monetary equivalent of what Chairman Mao called “bombarding the headquarters”. China’s renminbi is rapidly displacing the US dollar as a trading currency not only in Asia and Europe but now also in the US home market.
The value of renminbi payments between the US and the rest of the world rose by 327 per cent in April this year from the same month a year ago (see chart) as more US corporations switched to using the Chinese currency to pay for imports from China, according to data from SWIFT, the international currency settlement firm.
originally posted by: Wrabbit2000
a reply to: InverseLookingGlass
I think libertarians will be pleased...until they learn the full scope of what these changes will do. It's damn hard to be an idealist when insuring there is food to eat each night becomes the overriding priority in life.
Hopefully our slide stops before going that far, but I do think some are rooting for this....and do so in total ignorance of how bad this could get for us normal folk trying to live each day through.
For all its charms and concentrated wealth, San Francisco is not known as a world financial center like New York, Hong Kong or London.
That may change if it succeeds in a drive to become the West Coast hub for business transactions conducted in Chinese currency.
I'm told the city is working on a proposal to become a center for offshore trading in Chinese yuan, allowing the currency to be used more widely beyond China's borders.
Mayor Ed Lee's office could not be reached for comment before press time Friday, but city officials are said to have lined up a "who's who in the San Francisco financial industry" to assist in the proposal.
Should the idea bear fruit, San Francisco would join Hong Kong, London and Singapore as places where offshore trading in yuan (a.k.a. renminbi or RMB) is growing, as China slowly moves to open up its financial system.
"It makes sense for an offshore center to be in a place like the San Francisco area that does a lot of trade-related business with China," said UC Berkeley economist Barry Eichengreen, author of "Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System."
It also makes sense for the Chinese government, which would like to lessen the influence of U.S. dollars, the primary mechanism of international trade, and increase the influence of the yuan. At the same time, Chinese and U.S. companies doing business with one another can save costs incurred by going through the process of currency exchange and conversion, and will have more "redbacks" on hand to invest in China.
"It can be a win-win," Eichengreen said.
Local banks authorized to process accounts receivable in Chinese currency are an essential go-between for offshore trading. Wells Fargo, which began accepting deposits and providing loans in yuan at its Shanghai branch late last year, would seem to be a good candidate.
Other banks mentioned in connection with the initiative include Silicon Valley Bank, which entered into a joint venture with Shanghai Pudong Development Bank last year; EastWest Bank, a Chinese American bank in Los Angeles with branches throughout California and China; and Bank of Communications, China's fifth-largest bank, which opened its West Coast flagship in San Francisco in 2011.
If the city were to become an offshore hub, it probably won't happen anytime soon. Some people close to City Hall have quietly pursued the idea for more than a year, and it has a number of hoops to jump through, including go-aheads from the U.S. Federal Reserve and the Chinese government.
"In the end, (the yuan) cannot be a principal international currency as long as it maintains capital controls and additional limits on internal interest rates," said McKinnon, author, most recently, of the "The Unloved Dollar Standard: From Bretton Woods to the Rise of China."
A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves, and that is commonly used in international transactions. Persons who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than persons in other nations because they need not exchange their currency to do so. According to economists such as Valéry Giscard d'Estaing, a former French Minister of Finance and president, a reserve currency gets certain benefits called the exorbitant privilege.
As of 2014 the United States dollar is the world's reserve currency, and the world's need for dollars has allowed the United States government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year. However, by increasing the value of the dollar, its status as a reserve currency hurts U.S. exporters.
Various political leaders from Russia and China have called the world to move towards a super-sovereign reserve currency. Similar discussions have been had in Europe by the Board for Global Financial Stability.
The article continues on to say importers can cut the cost of imports from China by agreeing to trade in renminbi rather than US dollar.