China Plans Global Role for RenMinBi (Yuan)

• Why are the Chinese doing this? They see a coming collapse of the USD. These are final moves towards a new monetary order. I seriously doubt the collapse of the USD will be a gradual event. So, China is stepping up actions to mitigate this coming disaster. The Peninsula reports :
    
  China has kick-started a major plan to internationalise the renminbi and the process is likely to be faster than many expect, according to HSBC. If successful, this could lead to nearly $2,000bn in annual trade flows, or as much as 50 percent of China’s total, being settled in renminbi each year by 2012, compared with less than 10 percent today.
   
  The move follows calls by China for the world to adopt a supranational currency to replace the dollar. “China is beginning an ambitious scheme to raise the role of the renminbi in international trade and finance and to reduce reliance on the US dollar,” said Qu Hongbin, China chief economist at HSBC.
   
  “This will likely be a multi-year and gradual process. Yet, we believe the pace is likely to be faster than many expect.” HSBC said the internationalisation of the renminbi was long overdue, given China’s rising economic power relative to the limited use of the renminbi overseas.
   
  The bank estimated that Chinese gross domestic product could hit $4,700bn this year, implying it could overtake Japan as the world’s second-largest economy in 2010, while it was likely to overtake Germany as the world’s second-largest trading country by the end of the year.
   
  China announced a pilot programme last week that expanded renminbi settlement agreements between Hong Kong and five major trading cities, including Guangzhou and Shanghai. Furthermore, this year the People’s Bank of China has signed a total of Rmb650bn ($95bn) in bilateral currency swap agreements with six central banks: South Korea, Hong Kong, Malaysia, Indonesia, Belarus and Argentina.
   
  HSBC said China was still in talks with other central banks to form additional swap agreements and was likely to expand them to cover all the country’s trade with Asia, excluding Japan. This would be followed by an expansion to take in other emerging countries, including those in the Middle East and Latin America, that needed renminbi to pay for their imports of Chinese manufactured goods.
   
  “More than half of China’s total trade flows, primarily bilateral trade with emerging market countries, are likely to be settled in renminbi in the next three to five years,” said Mr Qu. “This means that nearly $2,000bn worth of cross-border trade flows would be settled in renminbi, making it one of the top three currencies used in global trade.”

end