Yùân cánnot become the world's reserve currency.

[resume]

Take a trip to Beijing or a spork factory in the Chinese outback and you will see that the US is the dog and China its curly tail. ;D

Nine reasons why the Yuan cannot become the world's reserve currency.

[a href="www.forbes.com/2010/03/24/yuan-renminbi-currency-leadership-citizenship-world.html"]www.forbes.com/2010/03/24/yuan-renminbi-currency-leadership-citizenship-world.html[/a]


(1) The Chinese capital markets would need to have far more liquidity and transparency before investors would consider using the renminbi (China's official currency, whose unit of denomination is the yuan) as a world reserve currency, and there's no sign of that coming about.

(2) The U.S. has never, in its 234 years, missed a payment on its debt. Right at the dawn of the republic, during the War for Independence, Congress concluded that nonpayment of debt would be national humiliation and must never happen. (Argentina's congress took the opposite route when it approved the nonpayment of debts in 2002, to the applause of all the legislators present.)

(3) Because China is still a communist dictatorship, its fiscal and monetary policies won't respond to market forces the way a democracy's do, and that creates a strong element of uncertainty.

(4) China is facing its own demographic time bomb as a result of laws introduced in the 1980s that limit the number of births.

(5) China's economic growth is based on the export of low-added-value products and a controlled rate of exchange, which give it an unbalanced economy with a low level of consumerism.

(6) China is effectively two countries, one urban and developed the other rural and undeveloped, and the divide between them could lead to social instability that could threaten the country's economy and currency.

(7) The Chinese economy depends too heavily on exports to one nation, the U.S., and

(8) has structural weaknesses because of a lack of supply of raw materials.

(9) The U.S. economy relies on innovation and competition to generate productivity; without those free-market forces China's medium-term competitiveness is more uncertain.

The pound didn't stop being the world reserve currency overnight. The process started around 1870 and was completed in 1945. For the yuan to take over from the dollar, the Chinese would have to do a great many things extremely well, and the Americans would have to do a great many things very badly. It just does not make sense to bet on that happening. The dollar will continue to be the world reserve currency because, among other reasons, there is no valid alternative, especially now that the euro has been rocked by Greece's crisis.

[Virgil Showlion]

I admire your hostage-taking attitude, chopter. ;D

I agree with you that the Chinese Yuan isn't a particularly great candidate for WRC, but there's no question in my mind that the world will transition to an alternative. And if we're being completely forthright, there doesn't even need to be a WRC. Each nation can simply choose its own preferred basket of currencies and live with fluctuating prices. If the USD is no longer a stable preserver of wealth, a nation might as well cast a broader net.

(2) is admirably true; also, quickly coming to a point where it can not be. Paul Ryan's dour but faintly optimistic assessment.

This last month was yet another sell-off of US Treasuries by the Chinese (the fifth in a row, and seventh in eight months).

[jarhead1976]

Give it a few years . you might see this...

[Aman A.K.A. Ahamburger]

This last month was yet another sell-off of US Treasuries by the Chinese (the fifth in a row, and seventh in eight months).

Except y-o-y they are up from around 800 billion to 1.14 Trillion , and Japan has been buying up all the debt that China isn't.

[maui1]

there will not be another one country world currency, there will be a world currency backed with something to measure value against

all countries of the world, now know the risk of having all the power of world currency control under one country.