what's your take on the internationalization of RMB?
Hi Fellow Monkeys,
I was just wondering how you guys view the prospect of the RMB internationalization.
Some experts or even the government officials in the financial field say it will need time and that even China alone does not trade with the RMB but USD.
I personally think the RMB will be widely used in about 7 years.
Reason being,
1) China's presence in the global market will be more substantial 2) Trade related to China will triple after the storm is weathered 3) Euro crisis will leave Europe in despair and would leave them aback as it will need time to recover 4) The Chinese gov't will intervene in the market whenever necessary when they feel the RMB undervalued/overvalued - managed float 5) Dependence of China will increase YoY
Feel free to rebuff my argument, I would appreciate it if you guys could share your thoughts on this matter.
Cheers,
Q.
I don't think the RMB will become a reserve currency within 7 years, I think a more likely scenario is the emergence of a reserve currency comprised of a basket of the yen, rmb, euro, and dollar is much more likely, but even then I don't think that will happen anytime soon.
The dollar and the US are still seen as the world's safe haven, just look at the flight to US bonds during the 08-09 financial crisis. And even though China will be on par with the US as measured in PPP in just a few years, and on paper appears to be an equal of the US, there are other obstacles- mainly political- to the RMB becoming a reserve currency. The US for all its faults is still much more trusted than China and as unfair as it may seem, someone has to be the top dog (and control the world's reserve currency) and the vast majority of countries want it to be us rather than the chinese.
Having said all that though, I am not at all an expert and am curious as to how the chinese could accomplish this even in the face of global resistance? And also, what exactly do you mean by "trade realted to china will triple"?
Interesting post.
Not an expert by any means. Good points made above. But after analyzing everything you've mentioned (which at first glance seems semi-reasonable - given this shit show of a global economy and unprecedented actions since 07)... for me, only 1 thing matters - trust/confidence. If we can't even trust the economic data coming out of China - then why in the hell would you hold RMB? Can you trust a communist regime that has near total power to change anything they want on the drop of a hat?
US is not even close to being perfect and I'm not going to turn this into a China vs. US political/economic bash but at the end of the day US is the most transparent, reliable and influential economic machine. We have a highly inefficient political system but at least it has multiple voices. At the end of the day - it's all relative... (i.e. best at communicating confidence via a potentially corrupt country or you think everyone is all all roses and rainbows)
Whatever your take - don't care what it is, I doubt RMB will not be adopted by the major players in the long run. It will gain relevance, there will be a market, you will see substantial growth related to it - but will not be top dog.
Remember - when risk is on and money is to made, investors will play. When shit hits the fan, where they run is the real indicator of an assets strength and relevance. (quiet down metal bugs)
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