Monday, July 6, 2009

China Begins Trial Scheme For Yuan Trade Settlement

Another step away from the dollar.

China has commenced a pilot program for companies to settle cross-border trade transactions in the yuan, reports said. Currently, some Shanghai companies have already agreed to settle deals with their Hong Kong and Indonesian trading partners. The move is widely seen as China's attempt to globalize the use of the yuan in trade transactions, thereby lessening the use of the U. S. dollar.

Writes Hans Palmstierna in a private email to me:
It is sort of amazing that people pay more attention to the public statements by politicians then the actual implementation of schemes to get rid of the dollar. I wonder how many dollars will become superflous if this works out well for the Chinese? Wouldn't it also solve some of Chinas potential inflation-problems in the future, if a lot of companies held yuan instead of dollars? If the use of yuan expands, on the expense of the dollar, won't this mean that China will efficiently export back some of the price inflation that it has imported from the US?

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