STAFF NEWS & ANALYSIS
Top Chinese Banker Calls for Wider Use of Yuan
By - June 09, 2009

The head of China's second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency. Guo Shuqing (pictured left), the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars. Mr. Guo said the issuing of yuan bonds in Hong Kong and Shanghai would help to develop the debt markets in China and promote the yuan as a major international currency. It was the first time the head of a major Chinese bank has called for the wider use of the yuan, although a chorus of senior government officials have already voiced their concerns about the stability of the dollar and have said the yuan should be used more widely. "I think the US government and the World Bank can consider the issuing of renminbi bonds," he said, asking for a "mutual cooperation" between the US and China to promote Chinese financial services. He said bond issuance could be relatively small, at between 1bn and 3bn yuan (£100m to £300m). – UK Telegraph

Dominant Social Theme: New ways of thinking for the 21st century.

Free-Market Analysis: We find it interesting that Chinese leaders make this suggestion just after US Treasury Secretary Timothy Geithner visited (just what exactly did the parties speak about while he was over there?). No doubt, the issue of the dollar came up, since its weakness was a primary motivator for the trip. But when he proclaimed the dollar's viability during a university speech, students reportedly laughed.

The dollar remains troubled. The problems started long ago with the relentlessly profligate Bush administration and have only become more pressing with Obama. Countries such as China, Venezuela and Russia have in mind their own replacements. Another effort to replace the dollar is being mounted by forces sympathetic to the International Monetary Fund. The IMF is basically a Western creation and is still controlled by the West, specifically the Anglo-American axis. Geithner himself has endorsed the IMF option several months ago, and the G20 signed off recently as well. Wonder why.

For the IMF to begin to provide a new currency, a sharply differentiated money product would have to be created along with some sort of independent central bank. Here's a question: How will the IMF and its supporters go about substituting an IMF currency for the dollar? One is forced to the conclusion that the United States and Britain would have to get behind such an effort (the dollar being maintained not by the market but the military). It is simple enough. If those at the top of American leadership don't want a replacement for the dollar there will probably be none. The Arab oil states will be instructed firmly not to trade oil in any other currency but the dollar, and currency insurrection will die a quick death.

Another question: If one truly seeks to create a global currency, what would be the easiest path? Would it be to debase the dollar while quietly encouraging a controllable alternative? Is this what is taking place? Of course, the monetary elite never offers a single solution. Thus, goes the reasoning of those who see the world darkly, the situation eventually generates a Chinese solution (the yuan) a Russian solution (the ruble) etc. Regional solutions such as the amero circulate as well. And perhaps a regional currency is the real goal.

After Thoughts

Yes, this is a deeply cynical perspective. The postulate is that two successive American administrations have conspired to ruin the West's reserve currency. You know, were this the case, it would be so much easier simply to declare a new market-based gold and silver standard and let the invisible hand adjudicate its dispersal worldwide. What a world.

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