China pushes for use of yuan
Beijing, Nov. 15: China should reduce its dependence on international reserve currencies, which have contributed to an “unstable” world monetary system, a central bank official was quoted Monday as saying.
Mr Jin Zhongxia, deputy director-general of the People’s Bank of China’s international department, told a weekend forum that wider use of the yuan currency to settle accounts would help cut risks, the state-run China Daily reported.
“The existing international monetary system, centered on a small number of reserve currencies, is quite unstable,” Mr Jin said.
Mr Jin expressed concerns about the dollar, whose value has been falling for three months, and the US Federal Reserve moves to buy $600 billion of government bonds to boost domestic growth, which could further drive down the dollar.
Over-printing of reserve currencies “places emerging economies in a dilemma,” he said. Chinese officials have repeatedly expressed concern over the Fed plan, warning it could lead to a flood of speculative investment funds into emerging economies. Economies that peg their currencies to reserve currencies will thus face an increased risk of fund inflows, capital market bubbles and inflationary pressure, Mr Jin said.
Those whose currencies float freely, on the other hand, face risks posed by exchange rate fluctuations, rising trade costs and variable economic conditions, he said. Cross-border trade settlement in yuan effectively reduces the risks posed by exchange rate fluctuations to China’s trade partners, Mr Jin said.
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