April 22, 2008

Dollar v Yuan

An interesting discussion underway at Brad Stetsor's blog at the most excellent RGE Monitor website on the dollar's shrinking value and its ultimate impact on China centers on a hot editorial in the Shanghai Daily that says:
"The negative results of the US dollar's decline are evident: the rising prices
of all primary products, the intensified pressure on inflation globally, the confusion in the settlement of international transactions, etc. Worst of all, this is the US' disguised way of avoiding paying off its debts to foreign

The need for the dollar as the chief medium of exchange and unit of account in trade gives it an advantage that can't be matched at present. If the RMB Yuan matures, is fully convertible, and Chinese financial markets continue to advance the day may come when the Yuan may supplant the dollar. Morgan Stanley analysts still believe the most likely challenger to the dollar will be the Yuan or a currency unit centered on it.

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