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The Dragon unveils its treasure: a London-based Yuan market

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posted on Sep, 8 2011 @ 12:33 PM
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Its been a long time coming, but the rise of the Chinese economy is unmistakable, and it is now entering a new phase:


London’s pre-eminence in foreign exchange is such that it doesn’t need endorsements. Yet the City will be very happy with the one it is to receive; China’s official approval for London’s role as an offshore centre for trading the yuan.

With $2-billion of the Chinese currency traded daily (according to HSBC), the yuan market is minuscule next to the $4,000-billion worth of forex traded each day globally. But yuan trading is growing fast; that $2-billion has grown from literally zero in little more than a year.

For London, China’s endorsement is essentially a seal of approval on its current activities, and a green light to develop further yuan services and products. The U.K. hosts 37 per cent of the global forex market, twice the share of its nearest rival, New York...

...As companies increasingly settle Chinese deals in yuan, trading in the currency will grow exponentially.

But the approval has significance far deeper than a transatlantic turf war; it is another small step towards freeing the yuan. China has recently moved more quickly towards full convertibility, inducing frenzied market excitement. Long-time market participants are revising their expectations for full liberalization from 30-plus years to as little as five or 10.

Source


How seriously do you take the rise of the Yuan? Think again:


Chinese officials told European Union members that the yuan would be fully convertible by 2015, but the Chinese central bank's governor Zhou Xiaochan said there was no deadline for convertibility, according to Bloomberg.

Zhou said the offshore yuan market was developing faster than imagined. China has agreed to give the UK formally support to make London a key yuan trading center...

...Achieving full convertibility has been a condition for the yuan entering the IMF reserve currency basket, but Zhou has said that he sees no 'urgency' in including the yuan in the IMF currency basket.

The yuan's power in international markets is however growing. For one, Africa's biggest oil producer Nigeria, said it is diversifying its foreign exchange reserves to include the yuan, and will have yuan-denominated trade settlements in oil deals...

Source

China is a cautious player, and is well-aware of the potential dangers of global-scale currency trading, so the timetables have flexibility built-in. But in view of the precarious position the dollar finds itself in (at least in the medium to long term, but quite possibly in the immediate future as well) the question has to be asked: 'Is this the beginning of the end for the dollar as the unrivalled reserve currency?' It is obviously early days, but you don't have to be a genius to see where this could all eventually lead.

And can you imagine the shenanigans if - ahem - certain third parties decided this was decidedly against their interests? Perhaps when it comes to currency wars we ain't seen nothin' yet.

On the other hand, perhaps in reality it would be in the interests of all to see China prospering. After all who else is going to produce our goods — and maybe even buy the one or two things we might continue to manufacture?




posted on Sep, 8 2011 @ 12:41 PM
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Why is it the Yuan

I Thought that the Renminbi was the official offshore 'classical' money uint...

help, insight, explainations would be appreciated



posted on Sep, 8 2011 @ 12:47 PM
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If you can't beat em join em..



posted on Sep, 8 2011 @ 12:53 PM
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reply to post by St Udio
 


Well you can trade in stirling, but the man in the street just thinks pounds. Just the common parlance, nest-ce pas?

What do you reckon are its chances? The way I see it the dollar, the Euro and arguably even the pound are being undermined before our very eyes with every passing day. Unnervingly.



posted on Sep, 8 2011 @ 01:49 PM
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Originally posted by pause4thought
What do you reckon are its chances? The way I see it the dollar, the Euro and arguably even the pound are being undermined before our very eyes with every passing day. Unnervingly.


Except for the Euro which can still rely on German engineering prowess, the other two are backed by hot air and Sir Richard Branson's brashness.




posted on Sep, 8 2011 @ 02:09 PM
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reply to post by eldard
 


I fear even the Germans can't manufacture enough automobiles and washing machines to shore up the standing of a currency that also comprises the likes of Greece, Italy, Spain and Portugal. If either of the former goes 'poof' you can kiss goodbye to the Euro as a strong currency. And the contagion wouldn't stop at the borders of mainland Europe either. (Flamboyant one-of-a-kind entrepreneurs notwithstanding.
)

China, though, is a different prospect. Boy, can they deliver.



edit on 8/9/11 by pause4thought because: typo



posted on Sep, 8 2011 @ 05:26 PM
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Originally posted by pause4thought
reply to post by eldard
 


I fear even the Germans can't manufacture enough automobiles and washing machines to shore up the standing of a currency that also comprises the likes of Greece, Italy, Spain and Portugal. If either of the former goes 'poof' you can kiss goodbye to the Euro as a strong currency. And the contagion wouldn't stop at the borders of mainland Europe either. (Flamboyant one-of-a-kind entrepreneurs notwithstanding.
)

China, though, is a different prospect. Boy, can they deliver.



edit on 8/9/11 by pause4thought because: typo


A weak Euro is actually beneficial to the German states and Holland, and the resource-rich Nordic countries. As for the rest? Well, there's always poo-flinging.



posted on Sep, 8 2011 @ 05:44 PM
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Originally posted by pause4thought
reply to post by St Udio
 


Well you can trade in stirling, but the man in the street just thinks pounds. Just the common parlance, nest-ce pas?

What do you reckon are its chances? The way I see it the dollar, the Euro and arguably even the pound are being undermined before our very eyes with every passing day. Unnervingly.



i guess that Yuan sounds enough like Yen to automatically be lumped into the Forex speculation class ...
Renminbi don't work for the commoner, which sounds like a meat Entree' instead of a currency, wot
edit on 8-9-2011 by St Udio because: (no reason given)



posted on Sep, 8 2011 @ 06:02 PM
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Though not mentioned in this thread as of yet, I always hear of people talking about how China wants to destroy the dollar and the american economy so that it can become the new economic superpower. It seems to me that if China wants the yuan to become the world-reserve currency, the country can not afford for the dollar to collapse until well more than a majority of transactions in the world are not using it. I would expect China (and Russia too) to continue buying american debt to prop up the our economy until the world can safely drop the dollar without ravaging their economies as well. When the world reaches that point, I would expect the world to drop us like a hot potato.... Am I off base to think so?
edit on 2011/9/8 by michaelwpayton because: (no reason given)



posted on Sep, 8 2011 @ 06:12 PM
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reply to post by michaelwpayton
 


You are spot on, my friend. It could only be a possibility in the short to medium term were the dollar to collapse due to factors beyond China's influence. (But that is not inconceivable.)

I actually think the Chinese currency is more likely to simply join the current basket of 'safe haven' currencies, all things being equal. Though again, should the dollar, the Euro and the pound go AWOL, all bets are off. Even the notorious 'one world currency' could well come to the fore. And if the western powers have a say in the choice between the Yuan & the global currency, guess what the governments would be inclined to?..



posted on Sep, 8 2011 @ 06:14 PM
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Originally posted by eldard

A weak Euro is actually beneficial to the German states and Holland, and the resource-rich Nordic countries...


A weak Euro? Have you considered how close we are to seeing the end of the Euro (via closed banks, hyperinflation, etc.)? It may be just a matter of weeks. This has come in within the hour: Brinkmanship.



reply to post by St Udio
 



i guess that Yuan sounds enough like Yen to automatically be lumped into the Forex speculation class ...


Good point. (All the easier to confuse the masses, too...)



posted on Sep, 8 2011 @ 10:57 PM
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The term Yuan is not to confuse the masses, that is its name. Neither is it referred to as RMB but as either quai or yuan on the mainland. Though HSBC does have RMB in some of their advertisements as opposed to CNY.

Thinking that China would not pull the plug on the dollar is rather naive of people to think that way. China is very opportunistic and should they feel that they can achieve a goal by doing so they will and faster than you can say Rumpelstiltskin.

This is where many make the error saying that China would not do such a thing it would damage their economy to to great of an extent. One should remember, Beijing has stated in the past that it is willing to destroy the entire population to gain a small island off of its coast. This is the mind set and it is very much so alive in Beijing today. Don't ever think that they will not do something just because the West wouldn't do it, they will if the opportunity is perceived to exist.

On the consumer level, the Chinese have a ravenous appetite for global products with the primary products coming from Japan, Europe or other Asian countries. US products are few and on par price wise with most other similar products and the Chinese do desire US products.

As for the Yuan taking the place of the dollar as the sole reserve currency as opposed to the SDR, it is still to be freely traded on the markets though it is opening up. Now couple this with the fore mentioned and the Yuan is being set to play a major role given the chance. Yet this is doubtful as even the IMF has hinted at a global currency with the SDR as merely an interim step. Along with the fact that China itself having called for a global currency recently. Thus the most the Yuan could hope for is being part of the basket and not the sole player. Either way, the next few months should be rather interesting.



posted on Sep, 8 2011 @ 11:07 PM
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China is achieving their agenda, they are proping themselve to become a superpower in all fronts, one thing that China have right now, is time and time is in their hands.

They are playing by the book.

To think that just a few years ago, when you told people in this boards that China will become what is today, they would tell you that you were crazy and that China was still in the stone age and occurs let not forget the many times that some would relate to the mighty American power of the military in imaginary wars against the less to nothing communist country.
actually some still play the wars today.

I still remember . . .



posted on Sep, 9 2011 @ 12:02 PM
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Originally posted by pstrron
The term Yuan is not to confuse the masses, that is its name.

Sorry, I was being facetious.



Thinking that China would not pull the plug on the dollar is rather naive of people to think that way. China is very opportunistic and should they feel that they can achieve a goal by doing so they will and faster than you can say Rumpelstiltskin.

I understand where you are coming from. But as well as being opportunistic, they are shrewd. Personally, I have to say the Chinese government strikes me as less inclined to knee-jerk reactions than western governments. They have a very strong hand, and they know it. Behind those poker faces the cogs are turning coolly, and with Swiss precision. I'd say they are in no hurry whatsoever.


This is where many make the error saying that China would not do such a thing it would damage their economy to to great of an extent. One should remember, Beijing has stated in the past that it is willing to destroy the entire population to gain a small island off of its coast. This is the mind set and it is very much so alive in Beijing today. Don't ever think that they will not do something just because the West wouldn't do it, they will if the opportunity is perceived to exist.

I follow your logic. Yet the sabre-rattling is in reality largely for home consumption. What they are really interested in is economic dominance. This long-term goal serves their purpose of retaining political power very well. And nothing overrides that.


As for the Yuan taking the place of the dollar as the sole reserve currency as opposed to the SDR, it is still to be freely traded on the markets though it is opening up. Now couple this with the fore mentioned and the Yuan is being set to play a major role given the chance. Yet this is doubtful as even the IMF has hinted at a global currency with the SDR as merely an interim step. Along with the fact that China itself having called for a global currency recently. Thus the most the Yuan could hope for is being part of the basket and not the sole player. Either way, the next few months should be rather interesting.

Here our minds meet!

Time to invest in yuan?




edit on 9/9/11 by pause4thought because: superfluous quote removed



posted on Sep, 10 2011 @ 11:12 AM
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reply to post by pause4thought
 





Time to invest in yuan?


That's not a bad idea but then I'm a little biased in that regard since it's my current main medium of exchange. Personally I have watched the CNY go from 8.25 to 6.38 to the dollar. Currently we are 1 CNY = 1.22 HKD and that is shear delight when going to Hong Kong.

As for the yuan's relative value, it is still under valued by 40% if not higher. In truth the FOREX should be around 3.5 CNY = 1 USD. However Beijing is not about to allow that to occur quickly due to its impact on the mainlands economy. It would in turn be a boon to Hong Kong and Macau as the mainland residents would receive a tremendous boost in buying power and Hong Kong business ventures on the mainland would benefit from the exchange into HKD.

The US on the other hand would get the short end of the stick as any repayment in CNY would double. Though the return on debt bonds held in dollars by China would effectively loose 50% of there value. This puts China in the position of economic blackmail and it is just a matter of when is the right time to play the ace of spades that they hold. I would venture that they will play their ace once the dollar starts a major fall or hits close to 60-65. They could then claim that they were merely cutting their losses while driving the final nail in the dollars proverbial coffin. Like I stated before, they are opportunistic, let the opportunity present itself and they are more than happy to take advantage.

In the end, the yuan is a good bet but keep an eye on the FOREX.



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