What would be the benefits and risks? Under these circumstances, existing current controls on the capital account serve as a fire wall to cut off the instant transmission of financial risks in the international market.
And when Chinese exporters are paid with U. Is this a good time for China to make bold strides in internationalizing its currency?
Inking offshore yuan clearing agreements and setting up overseas yuan clearing centers seem to be at the top of the agenda of recent overseas trips by top Chinese leaders. Get Full Essay Get access to this section to get all help you need with your essay and educational issues.
Risks may exist in the process of yuan flowing back to China. If trade payments are made in yuan, it will greatly reduce the foreign exchange risks for Chinese importers and exporters, compared to when they use the US dollar.
Considering China is the most potentially fast-growing country in the next decade, there is a high possibility that RMB becomes a reserve currency where governments around the world and central banks will want to hold and use as part of their foreign currency reserves.
Free currency exchange and the establishment of clearing centers are important steps in pushing for internationalization of the Chinese currency. The valuation of the SDR basket is reviewed and adjusted every five years, with the nearest review taking place in RMB is the official currency of China.
More essays like this: It was a significant contribution to the development of offshore RMB debt capital market in Hong Kong as well as the channels for international corporations to raise capital for their china-based companies. The Global Times interviewed scholars and economists to unveil the answer.
Through the settlement of trade transactions, Chinese government can limit the use of currency on global currency markets.
Similarly, if the yuan becomes an international financing currency, Chinese firms do not have to borrow US dollars and suffer foreign exchange losses in case of exchange rate fluctuations. Internationalization should be done in a natural way that matches real demand for the yuan.
As such, if internationalization is pushed too far, and the capital account is opened indiscreetly, hot money will flow in to pursue higher rates in China, which will further inflate property prices. The criteria for successful yuan internationalization is that the yuan takes at least half of the trade settlement value, yuan-denominated assets can flow out of China freely, and a totally market-driven exchange rate regime is set up.
Many Chinese financial institutions are not well prepared for the settlement of the yuan and foreign currencies and free convertibility of the yuan. CNY exchange rate is set by Chinese central bank while CNH exchange rate varies when there is change of the amount of supply and demand.Sep 30, · China's yuan becomes part of the IMFs currency basket on Saturday, making it officially a reserve currency for the world's biggest central banks.
(Photo by FRED DUFOUR/AFP/Getty Images) China goes even more global this weekend. The enthusiasm of the major European financial hubs toward yuan trading shows that they are well aware that global use of the yuan is a future trend, helping to boost the finance and economy in. > Yuan Goes Global. Yuan Goes Global.
3 pages words. This is a preview content. A premier membership is required to view the full essay. View Full Essay. JACOBO F. TORRES. CASE DISCUSSION: YUAN GOES GLOBAL. 1. How does the Chinese government limit the use of the Chinese currency, the.
“The Yuan Goes Global” 1) How does the Chinese government limit the use of the Chinese currency, the RMB, on the global currency markets?
Through the settlement of trade transactions, Chinese government can limit. View Notes - The Yuan Goes Global from FIN at San Francisco State University. JasonLee BUS InternationalFinancialManagement ProfessorMefford MiniCase#1TheYuanGoesGlobal %(3).
Home» News» The Yuan Goes Global» The Yuan Goes Global The Yuan Goes Global SMU Professor Chow Hwee Kwan studies how Asian countries manage their currencies, and the impact of these policies on their economies.Download