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People's Daily Online>>China Business

Yearender: Yuan volatility tells true story (2)


08:30, December 14, 2011

Backed up by a steadily growing economy at home, the yuan has remained strong for years. And, in reverse, a stable yuan served the country's boom that led the global economy out of the financial turmoil.

Currently, the yuan is not fully convertible under the capital account, but it still looks attractive because China has stepped up efforts to raise its currency's international status.

Last month, China opened its currency market to direct trading of the yuan against the Australian and Canadian dollars, bringing the total of foreign currencies that can be directly traded with it to nine.

In Hong Kong, an offshore yuan market, there was a sharp increase in the share of bank deposits denominated in yuan last year. Dozens of foreign companies have issued yuan-denominated "dim sum" bonds there.

Admittedly, China has a long way to go in building the yuan into the world's currency. After all, it is the competitiveness of China's goods and services in the global market, not the central government, that will decide whether the yuan will be a true international currency.

Although economists are still largely at odds concerning the reshuffle of the dollar-based global monetary system, many have agreed that the crisis-resilient system should rely on a basket of currencies rather than a single currency.

Yes, a new monetary world is coming. If you cast a look back at life in Japan after the 1985 Plaza Accord, you will also realize that it is as simplistic as it is dangerous to press the yuan to appreciate.

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