Yuan could rank with dollar and euro
CHINA’S yuan could rank with the dollar and euro as a pillar of the global monetary system, Hong Kong’s former monetary authority chief Joseph Yam said.
Yam, now vice-president of the China Society for Finance and Banking, a think-tank under the People’s Bank of China, said that the international monetary system needed a “third leg,” and the yuan, also known as the renminbi, was the only candidate among national currencies.
The two existing legs, the dollar and euro, did not command the level of international confidence needed to sustain their status, leaving the system structurally unstable, he said.
“If the third leg falls in the form of a sovereign currency, it must be the renminbi,” he said.
Yam said recent moves by the PBOC, China’s central bank, to make the currency more flexible showed it was pushing forward with gradual internationalisation of the currency.
But there were five criteria to meet before it could serve as a third leg: size, economic strength, convertibility, a yuan-denominated market and a modern settlement system.