tag:blogger.com,1999:blog-5848640164815342479.post645248193436162544..comments2024-03-18T16:01:13.871-07:00Comments on Haq's Musings: Yuan to Replace Dollar in World Trade?Riaz Haqhttp://www.blogger.com/profile/00522781692886598586noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-5848640164815342479.post-34113425776287508742024-01-31T14:21:06.524-08:002024-01-31T14:21:06.524-08:00The era of US dollar dominance is 'finished,&#...The era of US dollar dominance is 'finished,' says Wall Street veteran who just retired after 54 years<br /><br /><br />https://markets.businessinsider.com/news/currencies/dick-bove-banks-usd-dollar-dominance-crypto-china-trade-outsourcing-2024-1<br /><br />"The dollar is finished as the world's reserve currency," Dick Bove, who retired as a financial analyst after 54 years this month, told The New York Times. Bove, 83, predicted that China's economy would surpass America's in size.<br /><br />The dollar's reign as the world's reserve currency is nearly over, Dick Bove says.<br /><br />The newly retired bank analyst blamed corporate offshoring and flagged the threat posed by China.<br /><br />Bove highlighted the de-dollarization trend and said other analysts are too bought in to admit it.<br /><br />The US dollar has been the lifeblood of global finance and trade since World War II — but one Wall Street veteran thinks the end of that era is nigh.<br /><br />"The dollar is finished as the world's reserve currency," Dick Bove, who retired as a financial analyst after 54 years this month, told The New York Times.<br /><br />Bove, 83, predicted that China's economy would surpass America's in size. He blamed the outsourcing of US manufacturing to other countries, arguing that trend has given other countries more control of international production, the global economy, and worldwide money flows.<br /><br />He also suggested that cryptocurrencies such as bitcoin could help fill the void left by the dollar's shrinking influence.<br /><br />Dollar-denominated assets make up nearly 60% of international reserves, per the International Monetary Fund. However, several countries are embracing "de-dollarization" — working to erode dollar dominance — especially after the US took advantage of Russia's reliance on the greenback to levy sanctions against it following its invasion of Ukraine in 2022.<br /><br />Nations ranging from Brazil and Argentina to India and Bangladesh are exploring the use of backup currencies and assets, such as the Chinese yuan and bitcoin, for trade and payments.<br /><br />Several governments have blasted the excessive influence of US monetary policy on other economies and currencies, the dollar's strength for pricing out poor countries from imports, and the diminishing need for a petrodollar now the US has achieved energy independence through domestic shale oil and green energy production.<br /><br />Bove, who worked at 17 brokerages during his career, told the Times that analysts who aren't forecasting dollar doom are simply "monks praying to money" who are unwilling to bite the hand that feeds them: the traditional financial system.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-50966289739328378822023-11-27T11:01:46.520-08:002023-11-27T11:01:46.520-08:00Arnaud Bertrand
@RnaudBertrand
SCMP editorial: htt...Arnaud Bertrand<br />@RnaudBertrand<br />SCMP editorial: https://scmp.com/comment/opinion/article/3242880/dollar-still-king-how-much-longer<br /><br />"The increasingly close relationship between China and Saudi Arabia has taken another significant step forward. The central banks of both countries have agreed on their first currency swap...<br /><br />In the longer term, it augurs a petroyuan future as the two countries are already the most important trading partners of each other.<br /><br />In a global political economy long dominated by the petrodollar, this could be the beginning of a seismic shift."<br /><br /><br />https://x.com/RnaudBertrand/status/1728923824996139481?s=20<br /><br />---------------------<br /><br />The increasingly close relationship between China and Saudi Arabia has taken another significant step forward. The central banks of both countries have agreed on their first currency swap worth a maximum of 50 billion yuan (HK$55 billion) over the next three years.<br /><br />In immediate terms, the pact will foster bilateral commerce denominated in both the yuan and the riyal. In the longer term, it augurs a petroyuan future as the two countries are already the most important trading partners of each other.<br /><br />In a global political economy long dominated by the petrodollar, this could be the beginning of a seismic shift. It has been a very long time coming.<br /><br />Almost a year ago, President Xi Jinping made a historic visit to Riyadh, followed by Hong Kong Chief Executive John Lee Ka-chiu in February. A flurry of deals followed.<br /><br /><br />The Shanghai Stock Exchange and its Saudi counterpart have started collaboration on cross-listings, including exchange-traded funds (ETFs), financial technology (fintech), environmental, social and governance (ESG) and data exchange.<br /><br />China, Saudi Arabia central banks sign currency swap accord to foster trade<br />21 Nov 2023<br />The People’s Bank of China (PBOC) building in Beijing on Tuesday, April 18, 2023. Photo: Bloomberg<br />The Hong Kong Monetary Authority, the city’s de facto central bank, and the Saudi Central Bank have enhanced ties covering the latest technologies in regulatory supervision and monitoring, and in financial fields such as tokenisation and new payment systems.<br /><br />However, the latest currency swap pact will be the most important. It means trade can be conducted in local currencies, instead of defaulting to the US dollar. This may be seen as a challenge to US dollar dominance. Perhaps in the longer term, it is. But there is a good economic reason.<br /><br />The current US federal interest rate of 5-plus per cent has pushed the dollar to historical levels against most other currencies, making trade denominated in the dollar more expensive.<br /><br />There are obvious advantages for two big trade partners like China and Saudi Arabia to be able to utilise a local-currency option, which will help relieve pressures from having to trade in a more expensive currency.<br /><br />Global “de-dollarisation” may take a while yet, but the trend already reflects cracks in a global economy long used to US currency settlements.<br /><br />The yuan may or may not pose a challenge to dollar hegemony, but its internationalisation continues apace – to the benefit of both the Chinese and global economies.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-9084522284707222372023-05-16T16:30:02.427-07:002023-05-16T16:30:02.427-07:00Top 10 Countries that Export the Most Goods and Se...Top 10 Countries that Export the Most Goods and Services (Current US$ millions - World Bank 2020)<br /><br />https://worldpopulationreview.com/country-rankings/exports-by-country<br /><br />Rank Country Exports (Current US$)<br />1 China $2,723,250.43<br />2 United States $2,123,410.00<br />3 Germany $1,669,993.51<br />4 Japan $785,365.75<br />5 United Kingdom $770,478.62<br />6 France $733,165.40<br />7 Netherlands $711,504.80<br />8 Hong Kong (China SAR) $612,566.52<br />9 Singapore $599,216.28<br />10 South Korea $596,945.20<br /><br />Profiles of the world's largest exporters<br />1. China<br />Aside from the European Union (which is a collective of many countries), China is the world’s largest exporter. In 2020, China exported an estimated $2.72 trillion worth of goods and services, primarily electronic equipment and machinery such as broadcast equipment, computers, integrated circuits, office machine parts, and telephones. In 2018, China’s exports made up about 10.78% of the global total.<br /><br />2. United States<br /><br />The U.S. is the second-largest exporter in the world, with an estimated $2.12 trillion in exports for 2020. The largest exports of the U.S. are crude and refined petroleum; integrated circuits; pharmaceuticals and medical instruments; and aircraft including planes, spacecraft, and helicopters as well as their replacement parts. One of the reasons that the United States lags behind China in exports is the cost of labor. Many goods cannot be produced, manufactured, or assembled in the U.S. for a price comparable to that in China.<br /><br />3. Germany<br />Having exported an estimated $1.67 trillion worth of goods and services in 2020, Germany is the world’s third-largest exporter. As one of the most technologically advanced countries in the world, Germany’s main exports include automobiles (BMW, Mercedes-Benz, Porsche, Audi, Volkswagen), pharmaceuticals (Bayer), aircraft, machinery, electronics, and chemicals. Germany is the third of three countries to have exports exceeding $1 trillion, behind only China and the United States.<br /><br />4. Japan<br />Japan’s exports for 2020 were valued at an estimated $785.4 billion. Japan’s major exports include automobiles (Toyota, Honda, Nissan, Mazda, Suzuki, more) and automobile parts, integrated circuits and electronic devices (Nintendo, Panasonic, Sony, and many more). Japan's largest export customers are China, the United States, South Korea, Taiwan, and Hong Kong.<br /><br />5. United Kingdom<br /><br />The United Kingdom ranked as the fifth-highest exporter in the world in terms of dollar value in 2020, shipping an estimated $770.5 billion in goods and services to international customers. The U.K.'s top exports include cars (Bentley, Jaguar, Mini, Rolls-Royce, more), gas turbines, gold, medicines, hard liquor, antiques, and crude petroleum (which is often first imported from Norway, then exported to the rest of Europe, as well as China and South Korea).<br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-37701755082722721712023-05-09T19:05:05.478-07:002023-05-09T19:05:05.478-07:00#Pakistan joins global trend in dumping #US #Dolla...#Pakistan joins global trend in dumping #US #Dollar for #Chinese #yuan. The first shipment of over 750,000 barrels of #Russian #oil is expected to arrive in June, with Pakistan agreeing to a discounted per-barrel price of around $50–$52. #energy<br />https://www.cryptopolitan.com/pakistan-joins-in-dumping-usd-for-yuan/<br /><br /><br />Pakistan decides to purchase discounted Russian oil using the Chinese yuan, joining the global trend of de-dollarization.<br />The first shipment of over 750,000 barrels is expected to arrive in June, with Pakistan agreeing to a discounted per-barrel price of around $50–$52.<br />The decision follows sanctions imposed on Russia by the EU, G7, and their allies in response to Russia's invasion of Ukraine.<br />In a move reflecting the global shift towards de-dollarization, Pakistan has decided to purchase discounted Russian oil using the Chinese yuan.<br /><br />As part of the BRICS economic bloc’s efforts to conduct international trade in currencies other than the US dollar, Pakistan’s decision signals another transaction conducted using an alternative currency.<br /><br />Alternative payment for Pakistan amid sanctions<br />Pakistan is set to pay for Russian oil with the Chinese yuan, as local media report that the first cargo of over 750,000 barrels is expected to arrive in June.<br /><br />Although the exact amount and mode of payment have not been disclosed, sources reveal that Pakistan has agreed to a discounted per-barrel price of around $50–$52, significantly lower than the G7 price cap on Russian oil of $60 per barrel.<br /><br />This development follows sanctions imposed on Russia by the EU, G7, and their allies, including a ban on seaborne oil exports and a price cap on Russian oil.<br /><br />These measures were in response to Russia’s invasion of Ukraine and aimed to distance the nation from the West. Amid the focus on the Chinese yuan, talks of a BRICS trading currency are expected to progress at the annual BRICS summit.<br /><br />The growing influence of the Chinese Yuan<br />With the first shipment of 750,000 barrels anticipated to dock in June, Pakistan plans to pay for Russian crude oil using Chinese yuan. The Bank of China is expected to facilitate the transaction.<br /><br />However, the mode of payment and the discount offered to Pakistan remain undisclosed, as publicizing such information is not considered beneficial for either party.<br /><br />An official from Pakistan’s Ministry of Energy stated that Russia would supply URAL crude in the test cargo, which Pakistan Refinery Limited (PRL) will likely refine.<br /><br />Meanwhile, other sources report that Pakistan has agreed to a per-barrel price of around $50-52, lower than the G7 price cap on Russian oil of $60 per barrel.<br /><br />The decision to use the Chinese yuan for this transaction illustrates the currency’s growing acceptance in international trade, as well as concerns about the US abusing its dollar hegemony through sanctions.<br /><br />The yuan’s stability, China’s economic strength, and its large consumer market make it an increasingly reliable choice for international settlements.<br /><br />In recent months, several countries have expressed their inclination to settle trade deals in the yuan instead of the US dollar. Iraq’s central bank announced in February that it would trade with China using the yuan.<br /><br />Argentina followed suit in April, declaring that it would start paying for Chinese imports in yuan rather than in US dollars.<br /><br />According to data from multiple sources, the yuan became the most widely used currency for cross-border transactions in China in March, overtaking the dollar for the first time.<br /><br />The yuan was used in 48.4 percent of all cross-border transactions, while the dollar’s share declined to 46.7 percent from 48.6 percent a month earlier.<br /><br />This shift towards the Chinese yuan can be attributed to China’s ongoing efforts to open its financial sector, making it easier for global investors to participate in its domestic financial market.<br /><br />As the yuan’s role in global payment and settlement, foreign exchange reserves, and investment and financing expands, the de-dollarization trend is expected to continue.<br /><br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-53970076003072230512023-05-02T18:48:24.934-07:002023-05-02T18:48:24.934-07:00Speaking at ET Awards for Corporate Excellence 202...Speaking at ET Awards for Corporate Excellence 2023 last week, the veteran banker had said, “I genuinely feel that the biggest financial terrorist in the world is the US dollar." Telling why he feels this way, the Kotak Mahindra Bank chief stated that all our money is in nostro accounts and somebody in the US can say<br /><br />https://youtu.be/QXC9BsiRLlU<br /><br />-----------------<br /><br />'I'd like to correct': Uday Kotak clarifies ‘financial terrorist’ statement about US dollar<br /><br />In the March quarter, Kotak Mahindra Bank witnessed a notable increase in its standalone net profit, which rose by 26.3 per cent year-on-year to reach Rs 3,495.6 crore<br /><br />https://www.businesstoday.in/industry/banks/story/uday-kotak-clarifies-financial-terrorist-statement-on-us-dollar-as-reserve-currency-379470-2023-04-30<br /><br />Uday Kotak, the CEO of Kotak Mahindra Bank, has provided further clarification on his recent statement about the US dollar being the "biggest financial terrorist in the world." Kotak clarified in a tweet that his statement about the "financial terrorist" was not specifically aimed at the US dollar but rather at the disproportionate power that any reserve currency holds.<br /><br />According to Kotak, the US dollar's status as a reserve currency gives it an unfair advantage in controlling global transactions, which could potentially result in other countries becoming overly reliant on it. He further elaborated that a reserve currency wields significant power, including the ability to dictate whether money in nostro accounts can be withdrawn, which can have a profound impact on the global financial landscape. Kotak believes that the world is actively searching for an alternative reserve currency and posits that India has the potential to promote the Indian Rupee as a strong contender to fill this role on the global stage. By doing so, he suggested that India can reduce its dependency on the US dollar and promote a more diversified, stable global financial system.<br /><br />He clarified his previous statement in a tweet saying, "In a recent discussion on the US dollar, I inadvertently used words 'financial terrorist,' which I would like to correct. What I meant was that a reserve currency has disproportionate power, whether it is nostro account, 500 bps rate increase, or emerging countries holding $ for liquidity."<br /><br />In the March quarter, Kotak Mahindra Bank - the second-largest private bank in India - witnessed a notable increase in its standalone net profit, which rose by 26.3 per cent year-on-year to reach Rs 3,495.6 crore. The bank's net interest income (NII) also saw a significant jump of 35 per cent YoY to reach Rs 6,102.6 crore.<br /><br />--------------<br /><br />A nostro account refers to an account that a bank holds in a foreign currency in another bank. Nostros, a term derived from the Latin word for "ours," are frequently used to facilitate foreign exchange and trade transactions.<br /><br />https://www.investopedia.com/terms/n/nostroaccount.asp#:~:text=A%20nostro%20account%20refers%20to,foreign%20exchange%20and%20trade%20transactions.<br /><br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-34098454105927618042023-04-26T20:38:26.969-07:002023-04-26T20:38:26.969-07:00Genevieve Roch-Decter, CFA
@GRDecter
Chinese Yuan ...Genevieve Roch-Decter, CFA<br />@GRDecter<br />Chinese Yuan overtakes US dollar as most-used currency in China's cross-border transactions for the first time in history.<br /><br />Yuan-share rose to a record high of 48%, UP from nearly zero in 2010.<br /><br />U.S-share declined to 47%, DOWN from 83% over the same period.<br /><br />Wow.<br /><br />https://twitter.com/GRDecter/status/1651280199034585089?s=20<br /><br /><br /><br />The dollar falls behind the yuan for the first time in Chinese cross-border transactions<br /><br /><br />https://markets.businessinsider.com/news/currencies/dedollarization-dollar-dominance-yuan-chinese-cross-border-transactions-usd-renminbi-2023-4<br /><br />The yuan overtook the dollar as the most used currency for Chinese cross-border transactions.<br /><br />Its use in cross-border payments and receipts increased to 48% versus 47% for the dollar.<br /><br />China is pursuing further use of the yuan to avoid currency mismatches in trade.<br /><br />For the first time ever, the yuan has eclipsed the US dollar as the most used currency for Chinese cross-border transactions.<br /><br />The yuan's use in cross-border payments and receipts rose to 48.4% at the end of March while the dollar's share slid to 46.7%, according to a Reuters calculation of data from China's State Administration of Foreign Exchange.<br /><br /><br />In 2010, the yuan's share was nearly 0% while the dollar's was 83%, according to Bloomberg. The reversal comes amid China's efforts to empower the yuan, also known as the renminbi, in trade and capital markets.<br /><br />Meanwhile, Chinese bonds have seen greater inflows recently, alongside outflow increases to Hong Kong stocks.<br /><br />Increased reliance on the yuan will reduce any risks of currency mismatches. For this reason, China's State Council is encouraging expansions in the renminbi's use for cross-border transactions.<br /><br />But the dollar remains dominant beyond China's borders. For example, the yuan's share of global currency transactions for trade finance was just 4.5% in March compared to 83.7% for the dollar, per Reuters.<br /><br /><br /><br />Still, the yuan has continued to make inroads, especially since Western sanctions that froze Russia's foreign exchange reserves highlighted the potential risk of holding dollars.<br /><br />China has entered into non-dollar trade agreements with countries such as Brazil. And the yuan has overtaken the dollar as Russia's most traded currencysince Moscow was largely cut off from global finance after its invasion of Ukraine last year.<br /><br />But analysts say the dollar is unlikely to lose its dominance in global markets in the foreseeable future. That's as the yuan is too tightly controlled by the Chinese government.<br /><br />Read the original article on Business Insider<br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-12812804093152073262023-04-05T16:44:20.995-07:002023-04-05T16:44:20.995-07:00China, Malaysia to discuss Asian Monetary Fund to ...China, Malaysia to discuss Asian Monetary Fund to reduce dependence on US dollar<br /><br />https://www.foxbusiness.com/economy/china-malaysia-discuss-asian-monetary-fund-reduce-dependence-us-dollar<br /><br />China and Brazil recently struck a deal to ditch the U.S. dollar in favor of their own currencies in trade transactions<br /><br />Malaysia is reviving a decades-old proposal to create an Asian Monetary Fund to reduce dependence on the U.S. dollar, with China being open to talks about the matter.<br /><br />Malaysian Prime Minister Anwar Ibrahim proposed the fund last week, Bloomberg reported.<br /><br />"When I had a meeting with President Xi Jinping, he immediately said, ‘I refer to Anwar’s proposal on the Asian Monetary Fund’, and he welcomed discussions," Anwar, who also serves as the country's finance minister, told the Malaysian parliament on Tuesday.<br /><br />"There is no reason for Malaysia to continue depending on the dollar," he added.<br /><br />Anwar said he shelved forming an Asian Monetary Fund during his first stint as finance minister in the 1990s. At the time, the idea failed to gain traction as the U.S. dollar was still seen as strong, he said.<br /><br />The dollar index reached a record-high in September 2022 as other Asian currencies hit multi-decade lows, the news report said.<br /><br />Recently, China and Brazil struck a deal to ditch the U.S. dollar in favor of their own currencies in trade transactions.<br /><br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-25042623397697854582023-03-13T20:44:14.515-07:002023-03-13T20:44:14.515-07:00Arif Rafiq
@ArifCRafiq
“The only reason that Ameri...Arif Rafiq<br />@ArifCRafiq<br />“The only reason that America can run the deficits that it does is because the dollar is the global reserve…As we move to a more multipolar financial system, it will be tougher for the US to run big debts.”<br /><br />https://twitter.com/ArifCRafiq/status/1635273905085755394?s=20<br /><br /><br />---------<br /><br />Why Biden is wise to reduce the deficit<br />Progressives are a bit too sanguine about debt levels<br /><br />https://www.ft.com/content/c99ba51b-3aac-40a4-b393-6fb5f56ba71b?accessToken=zwAAAYbd2YfskdPJm6UbOqxApNOzk2-19WunGw.MEYCIQCCWJNNpPoerDjz7p_Y9x4y84NXf0IUSjKSTsXDvO1oawIhANNWwOfAu6qzrJoQwB_-oLVB6UtFl_Is9oh6YRp1V-T0&segmentId=e95a9ae7-622c-6235-5f87-51e412b47e97&shareType=enterprise<br /><br />by Raana Foroohar<br /><br /><br /><br /><br /><br />Anyway, although we all know that tax cuts and trickle-down economics haven’t created more broadly shared prosperity, I’ve long thought that progressives were a bit too sanguine about debt levels. Let’s say, just for argument’s sake, that a mild recession produced a 20 per cent decline in tax receipts over the next year or two, which is not an unusual outcome during a down cycle, according to one of my favourite market analysts, Luke Gromen, who wrote about the topic recently in an issue of his newsletter, The Forest for the Trees. Let’s also assume a 4.5 per cent interest rate on federal debt (which may be a conservative estimate if the Fed keeps hiking), and a 12 per cent increase in entitlement payouts (also conservative given the number of ageing Americans). Taking those figures, Gromen shows that the interest expense of government debt would go back to the Covid crisis peaks that resulted in a “crash” in the UST market, and subsequently pushed the Fed into more quantitative easing.<br /><br />I’m not saying this is about to happen. But I am saying that it’s a tricky time in the economy, with the end of cheap money, cheap labour and cheap energy, and that makes it a potentially dangerous time for any country or company holding much debt. The failure of Silicon Valley Bank and the subsequent dominoes now falling has reminded us that there is plenty of hidden risk in the system at the moment.<br /><br /><br />------<br /><br /><br /><br />The only reason that America can run the deficits that it does is because the dollar is the global reserve. That won’t change immediately, but I do believe that the balance of global reserves will change significantly over time, in part because energy autocrats have seen dollar reserves weaponised since the war in Ukraine. As we move to a more multipolar financial system, it will be tougher for the US to run big debts. We will eventually have to come back to the kind of guns and butter debates about spending that we stopped having from the late 1970s onwards. For this reason, I think it’s wise for the Biden administration to show it cares about debt. Ed, would you agree, and how will it play politically?<br /><br />---------<br /><br /><br />Edward Luce Responds:<br /><br /><br /><br /><br />Will the resulting deficits endanger the US dollar? I don’t see much sign of that. The US dollar has accounted for around 60 per cent of global central bank reserves for the last couple of decades and that share has barely shifted. Countries without reserve currencies run budget deficits of 5 per cent of GDP without the sky falling on their heads. The key is to ensure that US trend growth is higher than interest rates on federal debt in order to hold it at stable levels. If that proves impossible, then the greenback could lose its throne. Even were Armageddon to strike, however, Art Laffer would still be available for power point presentations on his magical curve.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-77078244584008730462023-03-08T16:57:05.138-08:002023-03-08T16:57:05.138-08:00India's oil deals with Russia dent decades-old...India's oil deals with Russia dent decades-old dollar dominance | Reuters<br /><br /><br />https://www.reuters.com/markets/currencies/indias-oil-deals-with-russia-dent-decades-old-dollar-dominance-2023-03-08/<br /><br />India in the last year displaced Europe as Russia's top customer for seaborne oil, snapping up cheap barrels and increasing imports of Russian crude 16-fold compared to before the war, according to the Paris-based International Energy Agency. Russian crude accounted for about a third of its total imports.<br />----------<br /><br />NEW DELHI/LONDON, March 8 (Reuters) - U.S.-led international sanctions on Russia have begun to erode the dollar's decades-old dominance of international oil trade as most deals with India - Russia's top outlet for seaborne crude - have been settled in other currencies.<br /><br />The dollar's pre-eminence has periodically been called into question and yet it has continued because of the overwhelming advantages of using the most widely-accepted currency for business.<br /><br />India's oil trade, in response to the turmoil of sanctions and the Ukraine war, provides the strongest evidence so far of a shift into other currencies that could prove lasting.<br /><br />The country is the world's number three importer of oil and Russia became its leading supplier after Europe shunned Moscow's supplies following its invasion of Ukraine begun in February last year.<br /><br /><br />-------<br /><br />Some Dubai-based traders, and Russian energy companies Gazprom and Rosneft are seeking non-dollar payments for certain niche grades of Russian oil that have in recent weeks been sold above the $60 a barrel price cap, three sources with direct knowledge said.<br /><br />The sources asked not to be named because of the sensitivity of the issue.<br /><br />Those sales represent a small share of Russia's total sales to India and do not appear to violate the sanctions, which U.S. officials and analysts predicted could be skirted by non-Western services, such as Russian shipping and insurance.<br /><br />Three Indian banks backed some of the transactions, as Moscow seeks to de-dollarise its economy and traders to avoid sanctions, the trade sources, as well as former Russian and U.S. economic officials, told Reuters.<br /><br />But continued payment in dirhams for Russian oil could become harder after the United States and Britain last month added Moscow and Abu Dhabi-based Russian bank MTS to the Russian financial institutions on the sanctions list.<br /><br />MTS had facilitated some Indian oil non-dollar payments, the trade sources said. Neither MTS nor the U.S. Treasury immediately responded to a Reuters request for comment.<br /><br />An Indian refining source said most Russian banks have faced sanctions since the war but Indian customers and Russian suppliers are determined to keep trading Russian oil.<br /><br />"Russian suppliers will find some other banks for receiving payments," the source told Reuters.<br /><br />"As it is, the government is not asking us to stop buying Russian oil, so we are hopeful that an alternative payment mechanism will be found in case the current system is blocked."<br /><br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-74692096225013025522023-02-27T12:19:21.653-08:002023-02-27T12:19:21.653-08:00Money and Empire: Charles P. Kindleberger and the ...Money and Empire: Charles P. Kindleberger and the Dollar System<br /><br />By Perry Mehrling<br /><br />https://www.bu.edu/gdp/2022/11/08/money-and-empire-charles-p-kindleberger-and-the-dollar-system/<br /><br />Charles P. Kindleberger ranks as one of the 20th century’s best known and most influential international economists. A professor of International Economics at the Massachusetts Institute of Technology (MIT) from 1948-1976, he taught cosmopolitanism to a world riven with nationalist instinct. He worked to relieve the fears of his fellow citizens through education, thinking that if people understood how the dollar system worked, they would stop trying to destroy it. His research at the New York Federal Reserve and Bank for International Settlements during the Great Depression, his wartime intelligence work and his role in administering the Marshall Plan gave him deep insight into how the international financial system really operated.<br /><br />In the new book, “Money and Empire: Charles P. Kindleberger and the Dollar System,” Perry Mehrling traces the evolution of Kindleberger’s thinking in the context of a “key-currency” approach to the rise of the dollar system, which he argues is an indispensable framework for global economic development in the post-World War II era. The overall arc of the book follows the transformation of the dollar system, as seen through the eyes of Kindleberger.<br /><br />The book charts Kindleberger’s intellectual formation and his evolution as an international economist and historical economist. As a biography of both the dollar and Kindleberger, this book is also the story of the development of ideas about how money works. In telling this story, Mehrling ultimately sheds light on the underlying economic forces and political obstacles shaping a globalized world.<br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-79594503791119715832022-06-29T08:32:40.200-07:002022-06-29T08:32:40.200-07:00#India's Top Cement Maker Paying for #Russian ...#India's Top Cement Maker Paying for #Russian #Coal in #Chinese #Yuan. India tried setting up an #INR payment mechanism for #trade with Russia, but that has not materialized. Chinese businesses have used the yuan in trade settlements with Russia for years https://money.usnews.com/investing/news/articles/2022-06-29/exclusive-indias-top-cement-maker-paying-for-russian-coal-in-chinese-yuan<br /><br />India's biggest cement producer, UltraTech Cement, is importing a cargo of Russian coal and paying using Chinese yuan, according to an Indian customs document reviewed by Reuters, a rare payment method that traders say could become more common.<br /><br />UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino, the document showed. It cites an invoice dated June 5 that values the cargo at 172,652,900 yuan ($25.81 million).<br /><br />Two trade sources familiar with the matter said the cargo's sale was arranged by SUEK's Dubai-based unit, adding that other companies have also placed orders for Russian coal using yuan payments.<br /><br />The increasing use of the yuan to settle payments could help insulate Moscow from the effects of western sanctions imposed on Russia over its invasion of Ukraine and bolster Beijing's push to further internationalise the currency and chip away at the dominance of the U.S. dollar in global trade.<br /><br />The sources declined to be identified as they are not authorized to speak to the media. UltraTech and SUEK did not respond to a request seeking comment.<br /><br />"This move is significant. I have never heard any Indian entity paying in yuan for international trade in the last 25 years of my career. This is basically circumventing the USD (U.S. dollar)," a Singapore-based currency trader said.<br /><br />The sale highlights how India has maintained trade ties with Russia for commodities such as oil and coal despite the western sanctions. India has longstanding political and security ties with Russia and has refrained from condemning the attack in Ukraine, which Russia says is a "special military operation".<br /><br />It was not immediately clear which bank opened a letter of credit for UltraTech and how the transaction with SUEK was executed. SUEK did not respond to a request seeking comment.<br /><br />India has explored setting up a rupee payment mechanism for trade with Russia, but that has not materialized. Chinese businesses have used the yuan in trade settlements with Russia for years.<br /><br />For Indian trade settlements using the yuan, lenders would potentially have to send dollars to branches in China or Hong Kong, or Chinese banks they have tie-ups with, in exchange for yuan to settle the trade, two senior Indian bankers said.<br /><br />"If the rupee-yuan-rouble route turns out to be favourable, the businesses have every reason and incentive to switch over. This is likely to happen more," said Subash Chandra Garg, a former economic affairs secretary at India's finance ministry.<br /><br />India's bilateral trade with China, for which companies largely pay in dollars, has flourished even after a deadly military clash between the two in 2020, though New Delhi has increased scrutiny on Chinese investments and imports, and banned some mobile apps over security concerns.<br /><br />An Indian government official familiar with the matter said the government was aware of payments in yuan.<br /><br />"The use of the yuan to settle payments for imports from countries other than China was rare until now, and could increase due to sanctions on Russia," the official said.<br /><br />---<br />Business units of Russian coal traders in Dubai have become active hubs for facilitating deals with India in the recent weeks, as Singapore has grown wary of provoking western nations that invoked sanctions against Russia, said multiple coal traders based in Russia, Singapore, India and Dubai.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-46778193247276109582022-02-09T21:04:33.454-08:002022-02-09T21:04:33.454-08:00Michael Pettis
@michaelxpettis
1/5
More evidence o...Michael Pettis<br />@michaelxpettis<br />1/5<br />More evidence of the exorbitant burden the US dollar creates for the US economy? This interesting paper by<br />@BenignoGianluca<br />,<br />@LucaFornaro3<br />, and<br />@mw_econ<br />argues that unfettered capital inflows into the US reduce American productivity growth.<br /><br />https://twitter.com/michaelxpettis/status/1491616604760817664?s=20&t=Iru-JqgFCGBVpVVSIec9qg<br /><br />----------<br /><br /><br />Michael Pettis<br />@michaelxpettis<br />2/5<br />The reason, they say, is because, paradoxically, cheap access to foreign capital "leads to a contraction in economic activity in tradable sectors, which are the engine of growth in our economies."<br /><br />https://twitter.com/michaelxpettis/status/1491616607927472129?s=20&t=Iru-JqgFCGBVpVVSIec9qg<br /><br />--------------<br /><br /><br />Since the late 1990s, the United States has received large capital flows from developing countries - a phenomenon known as the global saving glut - and experienced a productivity growth slowdown. Motivated by these facts, we provide a model connecting international financial integration and global productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for U.S. non-tradable goods, inducing a reallocation of U.S. economic activity from the tradable sector to the non-tradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth. This effect, which we dub the global financial resource curse, can help explain why the global saving glut has been accompanied by subdued investment and growth, in spite of low global interest rates.<br />JEL Codes: E44, F21, F41, F43, F62, O24, O31.<br />Keywords: global saving glut, global productivity growth, international financial integration, capital flows, U.S. productivity growth slowdown, low global interest rates, Bretton Woods II, export-led growth.<br />∗Gianluca Benigno: LSE, New York Fed and CEPR; gi<br /><br />https://crei.cat/wp-content/uploads/2021/12/GFRC.pdf<br /><br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-10190812557324201912021-02-25T22:22:02.616-08:002021-02-25T22:22:02.616-08:00#America’s Perpetual War. #US doesn’t just bomb it...#America’s Perpetual War. #US doesn’t just bomb its enemies. It chokes them by using US$, global reserve currency, to enforce its own sanctions to punish them. Search for alternative to US$ is accelerating. It’ll be hard for #Americans to live beyond means https://www.nytimes.com/2021/02/15/opinion/us-sanctions.html<br /><br /><br />"by deluding themselves about the extent of America’s might, they are depleting it. A key source of America’s power is the dollar, which serves as the reserve currency for much of the globe. It’s because so many foreign banks and businesses conduct their international transactions in dollars that America’s secondary sanctions scare them so much. But the more Washington wields the dollar to bully non-Americans into participating in our sieges, the greater their incentive to find an alternative to the dollar. The search for a substitute is already accelerating. And the fewer dollars non-Americans want, the harder Americans will find it to keep living beyond their means."<br /><br />“It is past time,” Joe Biden pledged last year, “to end the forever wars.” He’s right. But his definition of war is too narrow.<br /><br />For decades, the United States has supplemented its missile strikes and Special Operations raids with a less visible instrument of coercion and death. America blockades weaker adversaries, choking off their trade with the outside world. It’s the modern equivalent of surrounding a city and trying to starve it into submission. Wonks call this weapon “secondary sanctions.” The more accurate term would be “siege.”<br /><br />America launched its first post-Cold War siege in 1990, after Saddam Hussein invaded Kuwait. For the next 13 years, Iraq — which before the war had imported roughly 70 percent of its food and medicine — needed United Nations approval to legally import anything. Claiming that everything from water tankers to dental equipment to antibiotics might have military use, Washington used its muscle at the U.N. to radically restrict what Iraq could buy. In her book, “Invisible War,” the Loyola University professor Joy Gordon notes that between 1996 and 2003, Iraq legally imported only $204 per person in goods per year — half of the per capita income of Haiti. After resigning to protest sanctions in 1998, the U.N.’s humanitarian coordinator in Iraq, Denis Halliday, warned, “We are in the process of destroying an entire society.”<br /><br />The U.N. ended its blockade of Iraq when the United States invaded in 2003. Since then, Washington has often claimed to employ “targeted” sanctions, which restrict arms sales or penalize only specific officials or companies, not entire populations. And in some instances, the sanctions are indeed targeted. But in the case of a few select foes — Iran, Venezuela, North Korea, Cuba and Syria — the United States has initiated or intensified sieges that contribute to the same kind of misery experienced in Iraq.<br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-39071330082515986472020-06-18T19:02:38.697-07:002020-06-18T19:02:38.697-07:00#US #Dollar is dominant #international #trade #cur...#US #Dollar is dominant #international #trade #currency, with a 51.9% share of value of international settlements/transactions, followed by #euro with 30.5%, #British pound with 5.4% and the rest is in #Asian currencies such as #Japanese #yen and #Chinese #yuan. Source: SWIFT<br /><br /><br />Worldwide Currency Usage and Trends<br />Information paper prepared by SWIFT in collaboration with City of London and Paris EUROPLACE<br />December 2015<br /><br /><br />This paper analyses a range of previously unpublished SWIFT messaging flows to address key questions on how currency usage in global payments is changing, namely:<br />— What are the top currencies used in international trade?<br />— What is the UK’s role in currency flows between Europe, Asia-Pacific and the Americas?<br />— What are the major currency flows with Europe, excluding the UK?<br />— What are the drivers or incentives determining the use of a particular currency?<br />— Are there regions or countries where the use of local currencies could grow?<br />The US dollar prevails as the dominant international trade currency, with a 51.9% share of the value<br />of international currency usage in 2014. The euro is second, with a 30.5% share of the total value. The British pound is third, with a 5.4% share of<br />the total value, followed by Asian currencies such<br />as the Japanese yen and the Chinese yuan. While accounting for a relatively small proportion of worldwide international currency usage, the Chinese yuan (CNY) or renminbi (RMB), is nonetheless experiencing a stellar ascension, as evidenced by the SWIFT monthly RMB Tracker3. At the time of writing this paper, SWIFT data shows the RMB is currently ranked fifth for Asia-Pacific inflows and outflows with Europe, excluding the UK4.<br />The analysis of current financial flows (bank-to- bank flows) does not fully reflect the global reach of commercial flows (customer-to-customer flows). Many import and export settlements involve intermediation by banks that are based<br />in established financial centres. As such, the importance of US dollar clearing banks in the United States, reflecting the prevalence of the US dollar in international trade, and the importance of<br />the UK as a payments intermediary for euro flows, continues to be reflected in SWIFT statistics.<br />Looking at financial flows in value, the UK is the main correspondent country within Europe for Americas and Asia-Pacific, regardless of the currency. UK financial institutions process more than 50% of all European inflows and outflows with the Americas and Asia-Pacific.<br />For commercial flows denominated in the euro or in Chinese yuan, UK-based banks also play a significant role, intermediating flows to and from Europe.<br />The British pound’s ranking in third position, and the scale of its usage on a worldwide basis, is reflective of the UK and specifically London’s role as a centre of financial market activity. However, for financial flows where the UK is not involved, the British pound’s share is very small. In contrast, for euro financial flows that take place outside<br />of the Eurozone, the euro’s share compared to other currencies is more significant. This highlights the geographical spread of euro-denominated payments.<br />The Chinese yuan’s usage continues to grow significantly, particularly in flows between Europe and Asia-Pacific, which have increased considerably over the last two years, and where the currency is now ranked fifth. The People’s Bank of China (PBOC) demonstrates a strong commitment to promoting the internationalisation of the Chinese yuan, and the Chinese government has implemented a range of supportive policy measures.<br />In contrast, the European Central Bank (ECB)<br />has not pursued the same internationalisation<br />strategy with the euro. Its focus has been on<br />regional stability rather than expanding the euro’s<br />international commercial usage, as noted in the<br />ECB’s July 2015 report ‘The international role of the<br />5 euro’ .Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-86254959187262760322017-02-27T13:47:25.387-08:002017-02-27T13:47:25.387-08:00President #Trump: Replace The US $ With #Gold As T...President #Trump: Replace The US $ With #Gold As The Global Currency To Make #America Great Again via @forbes<br /><br />https://www.forbes.com/sites/ralphbenko/2017/02/25/president-trump-replace-the-dollar-with-gold-as-the-global-currency-to-make-america-great-again/#5936ed0a4d54<br /><br />Inside President Trump’s otherwise “standard Trump stump speech” at CPAC was nestled what might be a most intriguing observation:<br /><br />Global cooperation, dealing with other countries, getting along with other countries is good, it’s very important. But there is no such thing as a global anthem, a global currency or a global flag. This is the United States of America that I’m representing.<br /><br />There's a keen insight in there that could, just maybe, transform our lives, America, and the world. No "global currency?" Was this, with the poetic observation that “there is no such thing as a global anthem…or a global flag,” just a trope? Or could it contain a political portent with potential high impact on world financial markets? Let’s drill down.<br /><br />As it happens, there is a global currency.<br /><br />It’s called the "U.S. dollar.”<br /><br />Most international trade is priced in dollars. The Bretton Woods international monetary system invested the dollar, which then was defined as and (internationally) was legally convertible to gold at $35/oz, with global currency status. France’s then-finance minister, later its president, Valéry Giscard d'Estaing, called the “reserve currency” status of the dollar -- its status, along with gold, as global currency -- an “exorbitant privilege.”<br /><br />By this d'Estaing was alluding to the fact, as summarized at Wikipedia, that "As American economist Barry Eichengreen summarized: 'It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one.'" That privilege, which made great sense during the period immediately after World War II, became a curse.<br /><br />In 1971 President Nixon, under the influence of his Svengali-like Treasury Secretary John Connally, "suspend[ed] temporarily the convertibility of the dollar into gold." That closure proved durable instead of temporary. The dollar became, and remains, the world's global currency.<br /><br />What had been an “exorbitant privilege” devolved into an exorbitant liability. As my former professional colleague John D. Mueller, of the Ethics and Public Policy Center, formerly Rep. Jack Kemp's chief economist, writing in the Wall Street Journal in Trump's Real Trade Problem Is Money recently and astutely observed:<br /><br />a monetary system based on a reserve currency is unsustainable, since foreign official dollar reserves (for example) are acquired and must be repaid in goods. In other words, the increase in official dollar reserves equals the net exports of the rest of the world, which means it must also equal U.S. international payments deficits—an unsustainable situation.<br /><br />In other words, if President Trump wishes to address America’s merchandise trade deficit (balanced to perfection, of course, by a capital accounts surplus) he will find that allowing the dollar to be used as the global currency is the real snake in the economic woodpile. The dollar’s burden as the international reserve currency, not currency manipulation by our trading partners or bad treaties, is the true villain in the ongoing melodrama of crummy job creation.<br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-67300451844517600882015-12-05T17:53:41.879-08:002015-12-05T17:53:41.879-08:00#China Creates a World Bank of Its Own, and the #U...#China Creates a World Bank of Its Own, and the #US Balks http://nyti.ms/1XH1gIO Contd<br /><br />The Chinese-led institution, the Asian Infrastructure Investment Bank, is now in the process of picking its first projects. The choices, expected to be announced in coming months, will provide insight into how China plans to wield its power.<br /><br />Either China is serious about taking a leadership role in the global economy and prioritizing projects that broadly benefit Asia, or it plans to use the bank as a conduit to further its own ambitions.<br /><br />So far, China appears to be navigating the two extremes. It is assuaging critics by compromising on issues like board makeup, project oversight and procurement. But China is hardly yielding control, raising concerns about where the bank will land on issues like climate change and labor rights. The bank, for example, is still weighing whether to approve coal-fired power plants.<br /><br />China is taking direct aim at the current development regime, the Bretton Woods system established under the leadership of the United States after World War II to help stabilize currencies and promote growth.<br /><br />Beijing officials say they want to take a faster approach than their counterparts at the World Bank, the International Monetary Fund and the Asian Development Bank. The new bank, China promises, will not be bogged down in oversight.<br /><br />The Chinese-led bank will also focus solely on infrastructure. To China, the World Bank and the Asian Development Bank failed to deliver on big projects meant to transform backward parts of Asia, resulting in an estimated $8 trillion of needed investment in rails, ports and power plants.<br /><br />As a complement to the new bank, China is rolling out the “One Belt, One Road” program for the construction of a network of roads, rails and pipelines along the old Silk Road route through Central Asia to Europe. A maritime equivalent calls ports from Southeast Asia to East Africa to the Mediterranean.<br /><br />“The U.S. risks forfeiting its international relevance while stuck in its domestic political quagmire,” Jin Liqun, the president-designate of China’s bank, wrote in a chapter for a recently released book, “Bretton Woods: The Next 70 Years.” He added, in reference to the United States, “History has never set any precedent that an empire is capable of governing the world forever.”<br /><br />At the signing of the agreement for the bank in June, Mr. Jin and Mr. Xi posed for a photo alongside officials from the other 56 founding member nations in the Great Hall of the People.<br /><br />An unexpectedly large group, it included countries as diverse as Iran and Israel, Russia and Poland, and an array of American friends. The total capital commitment, $100 billion, was double the amount originally envisioned.<br /><br />Having underestimated the interest, the Obama administration is now starting to soften its stance. Three months after the signing, Mr. Xi met with President Obama at the White House, in the Chinese leader’s first state visit. At the summit meeting, Mr. Obama urged the existing banks to cooperate with the new institution. The United States, though, would still not join.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-65351916898169292022015-12-05T10:12:26.866-08:002015-12-05T10:12:26.866-08:00#China Creates a World Bank of Its Own, and the #U...#China Creates a World Bank of Its Own, and the #US Balks http://nyti.ms/1XH1gIO <br /><br />As top leaders met at a lush Bali resort in October 2013, President Xi Jinping of China described his vision for a new multinational, multibillion-dollar bank to finance roads, rails and power grids across Asia. Under Chinese stewardship, the bank would tackle the slow development in poor countries that was holding the region back from becoming the wealth center of the world.<br /><br />Afterward, the United States secretary of state, John Kerry, caught up with Mr. Xi in the corridor. “That’s a great idea,” Mr. Kerry said of the bank, according to Chinese and American aides briefed on the encounter.<br /><br />The enthusiasm didn’t last long, as the Obama administration began a rear-guard battle to minimize the bank’s influence.<br /><br />The United States worries that China will use the bank to set the global economic agenda on its own terms, forgoing the environmental protections, human rights, anticorruption measures and other governance standards long promoted by its Western counterparts. American officials point to China’s existing record of loans to unstable governments, construction deals for unnecessary infrastructure, and villagers abruptly uprooted with little compensation.<br /><br />But the administration suffered a humiliating diplomatic defeat last spring when most of its closest allies signed up for the bank, including Britain, Germany, Australia and South Korea. Altogether 57 countries have joined, leaving the United States and Japan on the outside.<br /><br />The calculation for joining is simple. China, with its vast wealth and resources, now rivals the United States at the global economic table. That was confirmed this week when the International Monetary Fund blessed the Chinese renminbi as one of the world’s elite currencies, alongside the dollar, euro, pound and yen.<br /><br />Countries are finding they must increasingly operate in China’s orbit. And backing the new bank would bring financial advantages, as well as curry favor with Beijing. While many countries had similar doubts as the United States, they figured they could just shape the organization from the inside.<br /><br />The new bank “is an instrument for China to lend legitimacy to its international forays and to extend its sphere of economic and political influence even while changing the rules of the game,” said Eswar Prasad, former head of the China division at the International Monetary Fund and a professor at Cornell University. “And it gives the existing institutions a kick in the pants.”Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-12636622139399057782015-12-01T16:47:42.547-08:002015-12-01T16:47:42.547-08:00#China's #Yuan joins #US $, #Euro #UK Pound, #...#China's #Yuan joins #US $, #Euro #UK Pound, #Japan's Yen as #IMF Approves its Reserve-Currency status http://bloom.bg/1LIVdXQ via @business<br /><br />The IMF will add the yuan to its basket of reserve currencies, an international stamp of approval of the strides China has made integrating into a global economic system dominated for decades by the U.S., Europe and Japan.<br /><br />The International Monetary Fund’s executive board, which represents the fund’s 188 member nations, decided the yuan meets the standard of being “freely usable” and will join the dollar, euro, pound and yen in its Special Drawing Rights basket, the organization said Monday in a statement. Approval was expected after IMF Managing Director Christine Lagarde announced Nov. 13 that her staff recommended inclusion, a position she supported.<br />It’s the first change in the SDR’s currency composition since 1999, when the euro replaced the deutsche mark and French franc. It’s also a milestone in a decades-long ascent toward international credibility for the yuan, which was created after World War II and for years could be used only domestically in the Communist-controlled nation. The IMF reviews the composition of the basket every five years and rejected the yuan during the last review, in 2010, saying it didn’t meet the necessary criteria.<br />“The renminbi’s inclusion in the SDR is a clear indication of the reforms that<br />have been implemented and will continue to be implemented and is a clear,<br />stronger representation of the global economy,” Lagarde said Monday during a press briefing at the IMF’s headquarters in Washington. Renminbi is the currency’s official name and means “the people’s currency” in Mandarin; yuan is the unit.<br />The Chinese Yuan’s Journey to Global Reserve Status: A Timeline<br />The addition will take effect Oct. 1, 2016, with the yuan having a 10.92 percent weighting in the basket, the IMF said. Weightings will be 41.73 percent for the dollar, 30.93 percent for the euro, 8.33 percent for the yen and 8.09 percent for the British pound. The dollar currently accounts for 41.9 percent of the basket, while the euro accounts for 37.4 percent, the pound 11.3 percent and the yen 9.4 percent.<br />The yuan weakened in offshore trading Tuesday amid speculation China’s central bank will rein in intervention now that the IMF vote on reserve-currency status is out of the way. The long-term goal is for very few interventions, People’s Bank of China Deputy Governor Yi Gang said at a briefing, adding that bigger two-way fluctuations are normal.<br /><br />In a preliminary report in July, IMF staff estimated the yuan would have a weight of about 14 percent to 16 percent. The weighting will affect the interest countries pay when they borrow from the IMF. It may also affect the scale of inflows the Chinese currency receives in the coming months.<br />Monetary System<br />The decision establishes the yuan as a fixture in the very international monetary system Chinese leaders criticized following the global financial crisis. In a landmark 2009 speech, PBOC Governor Zhou Xiaochuan argued a global system so reliant on a single currency -- the U.S. dollar -- was inherently prone to shocks. That conviction set off a global push by China’s leaders, including now-President Xi Jinping, to have the yuan included in the SDR, which countries can use to supplement their currency reserves.Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-60195018982325988502015-03-20T23:24:41.196-07:002015-03-20T23:24:41.196-07:00France, Germany and Italy to join China-backed ban...France, Germany and Italy to join China-backed bank - FT<br />- France, Germany and Italy have agreed to follow Britain's lead and join a China-led international development bank, dealing another blow to U.S. efforts to keep Western nations out of the new institution, the Financial Times said on Tuesday.<br /><br />The newspaper, quoting European officials, said the decision by the four countries to become members of the Asian Infrastructure Investment Bank (AIIB) was a major setback for Washington, which has questioned if the new bank will have high standards of governance and environmental and social safeguards.<br /><br />The AIIB was launched in Beijing last year to spur investment in Asia in transportation, energy, telecommunications and other infrastructure. It was seen as a rival to the Western-dominated World Bank and the Asian Development Bank.<br /><br />China said earlier this year a total of 26 countries were founder members, mostly from Asia and the Middle East.<br /><br />Japan, Australia and South Korea remain notable absentees in the region, though Australian Prime Minister Tony Abbott said at the weekend he would make a final decision on AIIB membership soon.<br /><br />South Korea has said it is still in discussions with China and other countries about its possible participation.<br /><br />Japan, China's main regional rival, has the biggest shareholding in the Asian Development Bank along with the United States<br /><br />http://www.reuters.com/article/2015/03/17/europe-asia-bank-idUSL3N0WI5Z820150317Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-29558111206540959522015-03-13T09:44:44.103-07:002015-03-13T09:44:44.103-07:00The Obama administration accused the UK of a “cons...The Obama administration accused the UK of a “constant accommodation” of China after Britain decided to join a new China-led financial institution that could rival the World Bank.<br />The rare rebuke of one of the US’s closest allies came as Britain prepared to announce that it will become a founding member of the $50bn Asian Infrastructure Investment Bank, making it the first country in the G7 group of leading economies to join an institution launched by China last October.<br /><br />High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/31c4880a-c8d2-11e4-bc64-00144feab7de.html#ixzz3UHiSl5o0<br /><br />Thursday’s reprimand was a rare breach in the “special relationship” that has been a backbone of western policy for decades. It also underlined US concerns over China’s efforts to establish a new generation of international development banks that could challenge Washington-based global institutions. The US has been lobbying other allies not to join the AIIB.<br />Relations between Washington and David Cameron’s government have become strained, with senior US officials criticising Britain over falling defence spending, which could soon go below the Nato target of 2 per cent of gross domestic product.<br />A senior US administration official told the Financial Times that the British decision was taken after “virtually no consultation with the US” and at a time when the G7 had been discussing how to approach the new bank.<br />“We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power,” the US official said.<br />British officials were publicly restrained in criticising China over its handling of Hong Kong’s pro-democracy protests while Mr Cameron has made it clear he has no further plans to meet the Dalai Lama, Tibet’s spiritual leader — after a 2012 meeting that prompted a furious response from Beijing.<br />While Beijing has long been suspicious about US influence over the World Bank and International Monetary Fund, China also believes that the US and Japan have too much control over the Manila-based Asian Development Bank. In addition to the AIIB, China is the driving force behind last year’s creation of a Brics development bank and is promoting a $40bn Silk Road Fund to finance economic integration with Central Asia.<br /><br />--------<br /><br />The Asia Infrastructure Investment Bank is one of four institutions created or proposed by Beijing in what some see as an attempt to create a Sino-centric financial system to rival western dominated institutions set up after the second world war. The other institutions are: the New Development Bank, better known as the Brics bank, and a contingent reserve arrangement, seen as alternatives to the World Bank and International Monetary Fund; a proposed Development Bank of the Shanghai Co-operation Organisation, a six-country Eurasian political, economic and military grouping dominated by China and Russia.<br /><br /><br />http://www.ft.com/intl/cms/s/0/31c4880a-c8d2-11e4-bc64-00144feab7de.html?siteedition=intl#axzz3UBLRoaEe<br />Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-72022851662964356892014-03-28T22:36:32.252-07:002014-03-28T22:36:32.252-07:00Few emerging nations in modern times have made the...Few emerging nations in modern times have made the leap from assembler to inventor, copycat to innovator. For China, this would mean an overhaul of its economy. Many of the products China manufactures today aren't really very Chinese at all. Apple iPads might be exported from assembly lines based in China, but the Chinese themselves do little more than piece them together. The core technologies come from elsewhere, and even the factories are run by foreign firms (like Taiwan's Foxconn). For Chinese companies to compete with the world's best, they have to create products of their own that have a similar impact as the iPad. That requires a set of skills and know-how they don't yet possess and a level of managerial expertise they haven't yet developed. Economist William Janeway, author of the book Doing Capitalism in the Innovation Economy, says what has gotten China thus far won't be enough for the next step: "It is hard to start the process of pushing the frontier with [such] practices and policies." http://content.time.com/time/magazine/article/0,9171,2156209,00.htmlRiaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-37505721140373901422013-01-28T11:29:22.803-08:002013-01-28T11:29:22.803-08:00China is the biggest trading partner of more natio...China is the biggest trading partner of more nations than the US, reports <a href="http://www.boston.com/news/world/asia/2012/12/02/impact-china-surpasses-top-global-trader/gwI1PLvAcDPSo90KjJgTUM/story.html" rel="nofollow">AP</a>:<br /><br /><i>In just five years, China has surpassed the United States as a trading partner for much of the world, including U.S. allies such as South Korea and Australia, according to an Associated Press analysis of trade data. As recently as 2006, the U.S. was the larger trading partner for 127 countries, versus just 70 for China. By last year the two had clearly traded places: 124 countries for China, 76 for the U.S.<br /><br /><br /><br />In the most abrupt global shift of its kind since World War II, the trend is changing the way people live and do business from Africa to Arizona, as farmers plant more soybeans to sell to China and students sign up to learn Mandarin.<br /><br />The findings show how fast China has ascended to challenge America’s century-old status as the globe’s dominant trader, a change that is gradually translating into political influence. They highlight how pervasive China’s impact has been, spreading from neighboring Asia to Africa and now emerging in Latin America, the traditional U.S. backyard.<br /><br />Despite China’s now-slowing economy, its share of world output and trade is expected to keep rising, with growth forecast at up to 8 percent a year over the next decade, far above U.S. and European levels. This growth could strengthen the hand of a new generation of just-named Chinese leaders, even as it fuels strain with other nations.<br />-----------<br /><br /><br />The United States is still the world’s biggest importer, but China is gaining. It was a bigger market than the United States for 77 countries in 2011, up from 20 in 2000, according to the AP analysis.<br /><br />The AP is using International Monetary Fund data to measure the importance of trade with China for some 180 countries and track how it changes over time. The analysis divides a nation’s trade with China by its gross domestic product.<br /><br />The story that emerges is of China’s breakneck rise, rather than of a U.S. decline. In 2002, trade with China was 3 percent of a country’s GDP on average, compared with 8.7 percent with the U.S. But China caught up, and surged ahead in 2008. Last year, trade with China averaged 12.4 percent of GDP for other countries, higher than that with America at any time in the last 30 years.<br /><br />Of course, not all trade is equal. China’s trade is mostly low-end goods and commodities, while the U.S. competes at the upper end of the market</i><br /><br />http://www.boston.com/news/world/asia/2012/12/02/impact-china-surpasses-top-global-trader/gwI1PLvAcDPSo90KjJgTUM/story.htmlRiaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-25241985205181774312012-12-15T10:50:31.351-08:002012-12-15T10:50:31.351-08:00RH: "Yuan to replace USD in world trade"...RH: "Yuan to replace USD in world trade"<br /><br />---<br /><br />Here are some simple explanations of why that will never happen anytime in the forseeable future.<br /><br />http://alturl.com/r66xv<br /><br />http://alturl.com/d23pnHopewinshttps://www.blogger.com/profile/07885301987622998733noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-1685462337280564372012-10-22T16:24:03.629-07:002012-10-22T16:24:03.629-07:00Here's a Reuters' report on Pakistani cent...Here's a <a href="http://uk.reuters.com/article/2012/10/22/uk-china-pakistan-bonds-idUKBRE89L0A620121022" rel="nofollow">Reuters' report</a> on Pakistani central bank buying Chinese government bonds:<br /><br /><i>Pakistan will join a growing list of central banks that will invest in China's interbank market as the world's second-largest economy opens its capital markets.<br /><br />The People's Bank of China announced on Monday that it had signed an agreement with the State Bank of Pakistan to help Pakistan invest in its local debt market, without providing details about the size of the investment programme.<br /><br />China has allowed foreign central banks to invest in its domestic interbank bond market since 2010 as part of efforts to widen investment avenues for foreign yuan asset holders and promote the international use of the Chinese currency.<br /><br />China and Pakistan signed a three-year currency swap deal worth 10 billion yuan ($1.60 billion) in December 2011 and companies in the two countries are encouraged to accept export and import bills in Chinese yuan.<br /><br />The central banks of Japan, South Korea, Singapore, Thailand, Hong Kong and Indonesia are among those who invest in China's bonds onshore.<br /><br />Besides central banks, China also allows yuan clearing banks in Hong Kong and Macau and foreign banks that help settle cross-boarder trade in yuan to invest in its interbank bond markets.<br /><br />($1 = 6.2538 Chinese yuan)</i><br /><br />http://uk.reuters.com/article/2012/10/22/uk-china-pakistan-bonds-idUKBRE89L0A620121022Riaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.comtag:blogger.com,1999:blog-5848640164815342479.post-90429496638037358302012-03-29T20:58:34.091-07:002012-03-29T20:58:34.091-07:00Here's a NY Times blog post on BRICS summit in...Here's a <a href="http://rendezvous.blogs.nytimes.com/2012/03/29/what-do-you-think-the-brics-can-build/?scp=1&sq=BRICS&st=cse" rel="nofollow">NY Times blog</a> post on BRICS summit in Delhi:<br /><br /><i>The leaders of Brazil, Russia, India, China and South Africa announced on Thursday that they would investigate establishing a system that would allow them to bypass the dollar and other global currencies when trading among themselves.<br /><br />The leaders of the BRICS group of nations also announced that they would explore setting up an alternative to the IMF and the World Bank that would loan to developing countries and bypass the U.S.-European axis of power that has dominated global economic affairs since World War II.<br /><br />In a story on the stakes and the obstacles before the BRICS nations, our colleague Jim Yardley explained that the group had not accomplished very much before this, their fourth summit meeting, in New Delhi. But Jim wrote that they were expected to come away with at least one concrete product this time:<br /><br /> They are expected to announce agreements that would enable the nations to extend each other credit in local currencies while conducting trade, sidestepping the dollar, a substantive move if not yet the kind of game-changing action once expected from BRICS.<br /><br />But that raises the questions:<br /><br />Do you expect the BRICS to change the global game? What is their potential as a bloc or an alliance? Indeed, are they a bloc at all, or just a list of countries whose growing economic might symbolizes the rise of a world where the United States is no longer solely dominant?<br /><br />The five countries have very different agendas and forms of government. Does this make forming any kind of unified policy or outlook unlikely? Are they really just a smart catchphrase from a Goldman Sachs economist to encapsulate changing global economics, as Walter Ladwig, a visiting fellow at the Royal United Services Institute, argued in the Opinion pages of the IHT?<br /><br />The French daily Le Figaro believes that “little by little, the BRICS are asserting themselves.” To what end, it does not say.<br /><br />In its analysis of the summit meeting, the Times of India concentrates on the group’s political statements urging negotiated resolutions of the conflict in Syria and the West’s nuclear standoff with Iran.<br /><br />Reuters concentrates on the lecturing and hectoring that BRICS leaders delivered to the profligate West, quoting the customary end-of-summit joint declaration: “It is critical for advanced economies to adopt responsible macroeconomic and financial policies, avoid creating excessive global liquidity and undertake structural reforms to lift growth that create jobs.”</i><br /><br />http://rendezvous.blogs.nytimes.com/2012/03/29/what-do-you-think-the-brics-can-build/?scp=1&sq=BRICS&st=cseRiaz Haqhttps://www.blogger.com/profile/00522781692886598586noreply@blogger.com