Asia Sentinel, 17 Jul 2009, Philip Bowring
China, like some other countries, has good reason to want to reduce the dominance of the dollar in international finance. But it is being carried away by dreams of glory for the yuan, dreams fostered by financial institutions anxious to ingratiate themselves with Beijing and promote Hong Kong as an offshore yuan trading center.
The logic of the proposed surge in the use of the yuan in international trade from near zero to as much as half of China's trade within a few years may at first glance sound plausible on the assumption that it is now the world's second largest trading country and third largest economy. It also holds the world's largest foreign exchange reserves and thus in theory may appear to have a very strong currency, which is likely to appreciate over time as China's economic growth outstrips mature economies, making it attractive to foreigners looking for alternative stores of value to the dollar.
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