The crisis processes seen in the global economy for a couple of years suggest that the global financial system is far from being perfect and that the US Dollar is not a stable global reserve currency. Numerous governments around the world keep saying that there is an urgent need to change the US Dollar for another global reserve currency. Many experts are pondering on the issue. In connection to this the Chinese Yuan sound like the most suitable alternative.
According to numerous experts, the Chinese currency may well replace the US Dollar within the next 10 years.
If to look back, we can see China accelerating and expanding its external trade. Beijing implemented a couple of reforms to improve the market of Yuan-denominated bonds. The significance of China’s economy and currency makes it relatively independent form the recent dollar and euro shocks.
However, the Chinese authorities are still in control of the Yuan exchange rate, which is a major obstacle for the Chinese currency on its way to international recognition. Still, China starts gaining leadership in the manufacturing and financial sector of the global economy, with its economy showing outstanding performance. For example, China has come close to the USA in terms of its share in the global GDP. Moreover, in the near future the Chinese economy is expected to outperform the US one.
However, it is still not clear whether the current pace of economic development will make China the world’s number one. The Chinese authorities still have to do their best to make China attractive for the army of foreign investors. China’s currency market is currently a closed structure, while the Yuan exchange rate is artificial.
Moreover, China’s outstanding economic performance is explained by its export-oriented economy. However, exports cannot expand forever. China needs a more stable source. The liberalization of China’s financial market will strengthen the Yuan, thus affecting the country’s exports and entire economy.
Obviously, while the US, Japan and the EU are trying to solve their debt problems, China is gradually consolidating its positions in Asia. By 2015 50% ($100B) of the Chinese-African trade will be conducted in yuans.
Such rapid development of China is dangerous for the US and other powers. They understand that in the near future the center of financial and economic gravity well may be shifted.
According to the Department of Market Volume Analysis, , Shanghai Compozite index has been declining for a month. It has already reached the level 2256.50.
