moving from greenbacks to redbacks
Renminbi will be world’s reserve currency
By Qu Hongbin
Published: November 10 2010 15:11 | Last updated: November 10 2010 17:42
If there is to be a rival to the dollar as the world’s reserve currency in the 21st century, it must surely be the Chinese renminbi, says Qu Hongbin, chief China economist at HSBC.
“We could be on the verge of a financial revolution of truly epic proportions,” he says.
“China’s aim of internationalising the renminbi has no doubt been helped by America’s pursuit of quantitative easing, a policy that many emerging nations have interpreted as an attempt to export US economic problems via a weaker dollar. Whether or not this is so, it will surely only encourage governments, reserve managers and companies to think about alternatives to the dollar.”
The increasingly important role in the global economy played by emerging markets will be crucial, he says.
“Emerging markets now account for 55 per cent of China’s total trade, and this is likely to rise rapidly. A switch from the dollar to the renminbi for trade settlement would be an appealing option for EM nations – and we expect at least half China’s trade flows with EM countries to be settled in renminbi within five years, making it one of the top three global trading currencies.
“Given China’s economic and trade power, as it moves closer towards full currency convertibility, it will become increasingly natural for the renminbi to be seen as a reserve currency. The world is slowly, but surely, moving from greenbacks to redbacks.”
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