The Chinese government has expanded the use of the yuan in international trade deals.
Originally China restricted the use of the yuan to just five cities, for trade with Southeast Asian nations. Later it was expanded so 20 provinces could use the yuan in all their international payments. Now, the People’s Bank of China gave permission to all businesses in China, to use the yuan for international trade payments.
Chinese officials say the decision was influenced by the crashing U.S. dollar.
A record amount of Chinese government bonds have been issued in Hong Kong. And investors are buying them up.
Several types of yuan based bonds, which mature between 2 and 10 years, were sold, totaling U.S.$3.1 billion, a record.
This was the third Chinese yuan bond issue in Hong Kong.
Demand was so high for this latest issue of yuan bonds that orders had to be stopped. There were 4.6 times more demands to buy the yuan bonds than there were yuan bonds to sell!
Analysts said China plans to issue more yuan bonds, with the goal to help promote the yuan as the next world currency, replacing the U.S. dollar.
“The Chinese policy mix includes a tool box of administrative measures … In general, one of the lessons that the United States and others can learn (from China) is that to have supervisory policies for bank regulatory systems can be a useful part of the tool set.”–Robert Zoellick, World Bank president
Zoellick gave a speech in Australia, August 14, and made it clear that China was a shining example of how economic policies should work. In fact he said that China’s yuan may help the world pull through “a time of danger.”
Zoellick did warn that the current inflation situation, in China, might be tougher to control than Chinese officials think.
The World Bank president also hinted that China’s cooperation with the bank, creating a “catalyst for consensus”, would benefit China in the near future.
“The U.S. wants China to pay its economic bills by raising the value of the yuan. This is preposterous!”-Zhang Yansheng, Institute of Foreign Economics
Officials from China and the United States are meeting this week to discuss, what else, economic issues. Many U.S. officials want the Chinese to raise the value of their money, the yuan, in order to help the U.S. dollar. But the Chinese say bullsh*t!
Ma Xiaoye, of the China Foundation for International & Strategic Studies, says U.S. leaders created the economic problems, so “How can the U.S. count on a foreign currency to solve them?” Zhang Yansheng added “The U.S. should take responsibility for its own policies, instead of asking China to pay for it.”
The U.S. wants China to raise the value of their money, against the U.S. dollar, to help fight inflation in the United States.
Chinese analysts say the problem is that every time the Federal Reserve implements a quantitative easing (QE) policy, it sends “hot money” into the world economy creating “market bubbles”, which is what China does not want.
Maybe if the Federal Reserve stops issuing money that really isn’t there, the Chinese might decide to raise the value of their money.