China's Yuan to grow in importance as international currency

KUALA LUMPUR: The yuan is poised to grow in importance as an international trading currency, in tandem with China's rise in the global economy.

HSBC Bank Hong Kong head of business planning and strategy Thomas Poon said the yuan, which he dubbed the “redback” for its red-hued 100 yuan note, would be in high demand now that the greenback had weakened.

“The reminbi (yuan) is more stable than the US dollar and allows traders to save on hedging and transaction cost. A manufacturer, for example, can focus on manufacturing rather than on hedging the prices of raw materials,” he said at the Activate Asia “Asean-China: Awakening of a New Economy” forum yesterday.
File picture shows a Chinese clerk counting US$ in exchange for the Chinese renminbi at a bank in Hefei, in central China's Anhui province. HSBC Bank Hong Kong head of business planning and strategy Thomas Poon predicts that by 2015, more than half of China’s total trade flows worth US$2 trillion would be settled in yuan - AP

Poon predicts that by 2015, more than half of China's total trade flows worth US$2 trillion would be settled in yuan, and this would mainly be bilateral trade with emerging economies, which currently account for 55% of China's trade. China is now the world's largest exporting country and second largest economy after the United States.

China's gross domestic product was US$5.7 trillion in 2010 compared with the United States at US$14.6 trillion.

HSBC Malaysia executive director and deputy CEO Jon Addis also said the yuan was gaining a foothold in Asia as a global currency, especially with intra-regional trade flourishing after the launch of the China-Asean Free Trade Agreement in 2010.

He cited HSBC's recent trade Confidence Index, which indicated that businesses believed the yuan had the potential to become one of the top three most used trade settlement currencies in 2011.