The yuan has a long way to go before it is ready to be an international currency, a top Chinese central bank official said yesterday, despite a recent push by Beijing to raise the yuan’s profile.
“We are cautious on the concept of the so-called internationalization of the renminbi [yuan],” Guo Qingping (郭慶平), vice governor of the People’s Bank of China, told reporters.
“Whether a currency becomes an international currency is not up to a specific country, but is up to the market,” Guo said.
China has been pushing aggressively for the wider use of the yuan abroad, signing a series of bilateral currency swap agreements in the past few months.
Central bank Governor Zhou Xiaochuan (周小川) earlier this year revealed China’s apparent desire to challenge the supremacy of the US dollar, publishing an essay calling for the dollar’s replacement as the global reserve currency.
Zhou had suggested the greenback be replaced by a basket of currencies.
Analysts, however, have warned it would likely take decades before the yuan assumes a truly global role and challenges the dollar.
Guo echoed that opinion, suggesting the yuan lacked the maturity for a global role for a number of reasons.
“First, the economic competitiveness of the currency and second, the financial market of the country in question have to be very powerful and developed and the currency itself has to be convertible,” Guo said.
“Third, the environment in which the currency is used should be stable,” he said.
The yuan is currently not freely convertible but is instead pegged to a basket of currencies and strictly controlled by the nation’s foreign exchange authorities.
“We believe that marrying the renminbi with these factors, the … yuan is not qualified enough to be an international currency, so we are cautious on this concept,” Guo said.
His comments came after China allowed 365 companies in Shanghai and the southern province of Guangdong to use yuan in cross-border trade from July 2, promoting greater use of the currency. The country had 70 million yuan (US$10.2 million) in international trade settled in the Chinese currency as of last week, Guo said.
But the top central banker said China wanted to play a bigger role in governance of the IMF and hopes the upcoming G20 summit in Pittsburgh, Pennsylvania, will try to reform its management.
Guo told a briefing that the summit should “set further specific goals for transferring voting rights from developed countries to developing countries” in international financial institutions.
Brazil, Russia, India and China have proposed a 7 percent shift in IMF quotas in favor of developing countries, more than the 5 percent the US is proposing.
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