article code 85258080768 CH, bp spain holdings
The ‘people’s currency’ of China is redefining the global economic monetary system. The closed-capital pariah is blossoming into a reserve standard and is hedging appeal against the indebted dollar and the untested euro, piquing foreign interest.
Degenerating credit quality across the board has prompted asset managers to shy away from the dollar, euro, Japanese yen, British pound, and Swiss franc. And some are turning to the yuan, a currency that 10 years ago was completely off limits to foreign investors.
An HSBC forecast projected that by 2015, the yuan will become one of the three most used currencies in global trade, in league with the dollar and euro. The report, issued in April, also foresees a third of China’s cross-border transactions being carried out in yuan.
China has been making a concerted effort to establish itself as an international currency reserve. China already has agreements with Russia, Vietnam, Thailand, and Japan allowing trade to be settled in yuan instead of dollars
As China launches its global currency, European financial centers are hoping to become Europe’s yuan hub. London, Paris, and Zurich have all made very vocal bids for this title. According to Bloomberg, the Bank of England has an inside track to be the first Group of Seven nation to sign a currency-swap with the People's Bank of China. The deal may grant the UK central bank as much as 400 billion yuan ($64 billion) in reserves.
Many national banks are switching over to the yuan to diversify their reserve currencies, Australia the most recent to join ranks with the world’s second largest economy.