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But Asia now understands that the increase of money supply decreases the intrinsic value of a currency. That is why China is seeking a possible and rational attempt to decouple Asian currencies from the dollar, as recent news stories report . In practice, China is trying to make its currency convertible and give it a role as a reserve currency. The first experiment is limited to transactions between Hong Kong and the neighboring provinces. It is also proposed that the yuan renminbi be used in 8 neighboring countries, including Russia. With these countries, agreements have already been signed for the settlement of contracts in the Chinese currency. Perhaps it is no coincidence that the news was released on Christmas Day, when Western markets are closed, reducing the impact on the dollar. In addition, the first weeks of January are usually fairly quiet. This means that although for now the trial is limited, China is preparing to establish full convertibility of its currency to all other currencies. Many in China have spoken out directly or indirectly in this regard: for example, Wu Xiaoling, former vice governor of the central bank, and Zhao Xijun, a professor of finance at Renmin University of China. The current governor of China's central bank, Zhou Xiaochuan, in early December in Hong Kong had indicated that if the value of the dollar fluctuated drastically, its use as a settlement currency (for commercial transactions) would cause problems. It is clear that Chinese exporters, behind the scenes, are asking the government for permission to charge in yuan instead of dollars, which are losing value. Other warnings came in the middle of last December: the increase in purchases of U.S. Treasury bonds should not lead to the supposition that the U.S. can borrow its way out of the financial crisis . Finally, on January 1, a well-known Chinese economist, Wu Jinglian, wrote that China must change its development model , with reference to the paradigm of economic growth driven by exports. We note, incidentally, that even the pope, who obviously has mainly pastoral responsibilities, has said the world must change its model of development  ("Are we are prepared to conduct together an in-depth review of the dominant development model, to correct it in a comprehensive and forward-looking way?" Benedict XVI asked).
Also as the Chinese model is based on export, it isn't in their benefit to have a strong currency just yet. Especially considering their volume of trade with the USA, and the subsequent purchase of oil using those dollars, they would have no interest to disrupt that balance. What would China do with forex once the Yuan is dominant?
subsequent purchase of oil using those dollars
nd the subsequent purchase of oil using those dollars, they would have no interest to disrupt that balance.
A What would China do with forex once the Yuan is dominant?
The dollar proved that when in crisis, it is still king.