CHINA / Trade |
Economist sees yuan as regional currency(Reuters)Updated: 2007-07-27 16:29 China is much keener on promoting the use of the yuan in Asia than in supporting the development of a regional currency, according to a prominent economist. "Just like the dollar replaced gold, the yuan can replace the dollar in the region," Zhong Wei, a professor at Beijing Normal University, told a regular Reuters forum of Chinese government and academic economists this week. Chinese officials have made reasonably positive noises in public about Asian monetary cooperation, which its boosters hope will lead one day to the creation of an Asian equivalent to the euro, the European Union's single currency. But Zhong said that Beijing in fact was unenthusiastic about the idea because of the potential it sees for internationalising the yuan. "China has little interest in developing an Asian currency. China is eyeing the yuan, not the yen, to become the leading regional currency," said Zhong, who is also editor-in-chief of a journal published by the State Administration of Foreign Exchange, the currency regulator. Jia Kang, president of Institute of Fiscal Science, a Ministry of Finance think-tank, said China had held initial talks with Japan and South Korea on the idea of a common currency.
"However, it has increasingly become a remote possibility," Jia told the forum. "It seems there is no serious commitment." The yuan is increasingly used by traders and tourists beyond the Chinese mainland, especially in Hong Kong. Zhong said Chinese research showed that about 25 billion yuan was in circulation in Hong Kong, 6 billion yuan in Vietnam, 5 billion yuan in Thailand, 1 billion yuan in Singapore and 1 billion yuan in Indonesia. Beijing last month took a big step towards institutionalising use of the yuan in Hong Kong by launching a market for mainland banks to issue yuan-denominated bonds in the special administrative region. The fact that the yuan was not fully convertible need not be an obstacle to its wider use, Zhong said. Residents and businesses alike in neighbouring countries would accept the yuan as long as local banks convert it back into their local currency, he said. "If you ask a Vietnamese, Singaporean or Thai, you'll find they really don't care about the concept of capital account opening," he said. In Hong Kong, where banks have been allowed to take yuan deposits and provide some other yuan banking services since February 2004, banks transfer surplus yuan to the local Bank of China branch, which remits it back to the mainland. Zhong said Bank of China could do the same in other countries. He said the People's Bank of China could also sign bilateral agreements with neighbouring countries to undertake to exchange yuan for dollars. "For instance, if Vietnam's central bank wants to change yuan into dollars, the Chinese central bank should agree to provide the service," he said. |
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