More on China's Currency Plans

229263 Resource 128460 120646 120646 1237982936848 1237984727071 Controlled China Calls for a New Global Reserve Currency

China ready to become the next global economic superpower

After World War II, the economically powerful nations got together at Bretton Woods to try and hammer out a monetary system. What they decided on, basically, was to make the U.S. dollar the world's reserve currency. The dollar would be tied to gold, and the other currencies would be tied -- within a fixed rate of exchange -- to the dollar. This system came to an end in 1971 when Nixon effectively took the dollar off its by then tenuous tie to gold.  But the U.S. dollar remains the most popular currency in the world -- the world's reserve currency. And the currency by which commodities (such as gold and oil) are priced. China ready for a new global reserve currency China wants all of that to change. With <a title="U.S. assets, reserve currency, Chinese yuan, U.S. dollar, economy, Kathy Lien, forex trading, China reserve currency" target="_blank" href="item/228747">U.S. assets becoming less valuable almost by the day</a>, and China poised to become the world's next economic superpower, it is no surprise that Chinese officials are pushing against the U.S. dollar as the reserve currency of choice. GFT's Kathy Lien describes <a title="U.S. assets, reserve currency, Chinese yuan, U.S. dollar, economy, Kathy Lien, forex trading, China reserve currency" target="_blank" href="http://www.fx360.com/commentary/kathy/891/u-s-dollar-topic-of-verbal-war-with-china.aspx?aid=5704">the fight between the U.S. and China over the dollar in FX360</a>: <blockquote> Last week, China’s Premier expressed their concern about their holdings of U.S. debt. Yesterday, Central Bank Governor Zhou released a paper calling for the IMF to create a “super-sovereign reserve currency,” a proposal that is backed by countries like Russia. Although part of their concern can be attributed to the weakness of the U.S. dollar, China’s comments are probably more politically motivated. Having grown into an economic powerhouse over the past 3 decades, they now have greater ambitions for the Chinese Yuan. At the same time, they want to reduce the global significance of the U.S. dollar and in turn, put themselves on a more level playing field. </blockquote> China is asking for a reserve currency that is based on shares held by IMF members. These would be called special drawing rights. These rights would be used to effectively supplant the U.S. dollar as a major reserve currency. International trade, commodity pricing and accounting would all be based on this reserve currency. As one might expect, U.S. leaders are not very fond of the idea. And it is unlikely that China can force it through anytime soon. However, the precarious position of the U.S. economy, and the dollar's likely fundamental weakness in the future, could lead to adoption of some sort of similar system down the road. At the very least, China is likely looking to use the Chinese yuan to supplant the U.S. dollar as a reserve currency. China is rising. And, with China as our biggest debt holder, the U.S. is in no position to make any demands. While other nations (well, other than Russia and a few others) are unlikely to accept such a drastic step right now, China could be trying to pave the way for the future. 9 application/xml false China reserve currency Chinese yuan economy forex trading Kathy Lien reserve currency U.S. assets U.S. dollar More on China's Currency Plans China wants to get rid of the U.S. dollar as the world's reserve currency http://news.yahoo.com/s/ap/as_china_global_currency;_ylt=Ao5YwnWVAAKRxF.ljtb1yt_Zn414 World Currencies in Forex Trading Forex news, information and analysis http://www.fx360.com/?aid=5704 Mozilla/5.0 (Macintosh; U; Intel Mac OS X 10.5; en-US; rv:1.9.0.7) Gecko/2009021906 Firefox/3.0.7 127.0.0.1 127.0.0.1 mmarquit 66.182.66.2 false true false false true 128460 blog blogsite/GFTForex/web