Posted on 09/07/2011 1:39:27 PM PDT by AfricanChristian
The steady internationalisation of China’s renminbi will see at least 40%, or $100-billion, of China’s trade with Africa being made using the currency unit by 2015, according to research just published by Standard Bank Group.
Standard Bank economist Jeremy Stevens, currently based in Beijing, says the $100-billion in renminbi-denominated trade by 2015 amounts to more than the total Sino-African trade in 2010. In addition, at least $10-billion of Chinese investment into Africa will be denominated in renminbi over the same period.
He says among the main benefits for Africa of renminbi internationalisation will be cheaper funding and lower transaction costs, all on a large scale.
In the paper titled “BRIC-Africa: the redback’s rise is an opportunity for Africa”, Stevens explains that renminbi internationalisation is the latest manifestation of China’s continuously shifting domestic economic system.
“China wants to increase the pairs against which the renminbi can trade, broaden the currency’s geographical reach and allow the renminbi for investment purposes.The change, which will be gradual, is symptomatic of a more multi-polar world,” says Stevens.
(Excerpt) Read more at afribiz.info ...
i guess i don’t see the remnibi becoming THE currency. However, if things do go that way, be sure the world will rue the day.
The Chinese don’t do ‘big bang’. They do gradual.
Africa is their most important testing ground, Africans don’t need too many dollars (most of their manufactured products and a significant percentage of foreign investment is from China).
They may need dollars to buy a few jet airliners and high-value goods, but since almost everything else comes from China, RMB transactions may be preferable.
the remnibi is a defacto dollar. what becomes of it when it’s untethered is to be determined. my guess is they’re trying to tie to other assets. Africa has gold, diamonds and oil.
Trade in African natural resources for Chinese manufactured products. China does have customers other than us Americans. Our choice as Americans is between getting busy at real work (manufacturing) or not.
With a billion people in Africa, they cannot all be employed in mining, growing, and shipping natural resources to China. Africa will need some of China's labor intensive manufacturing to continue to expand employment there. Africa will use the very same roads and ports to ship goods around the world as she did for shipping natural resources to China.
I don’t think RMB will replace the dollar in the short or medium term, but I suspect the Chinese are moving slowly to offset their exposure to the dollar, and for them it is a long term project.
What I didn’t explain is that the Chinese are seriously considering trading with selected Asian nations in RMB, so the expectation is that they will apply the lessons learned in Africa to trade with those nations.
As I earlier stated, it is incumbent upon the West to put its fiscal house in order. The British economy is too small for the pound to carry weight, the Euro is in crisis and the dollar is simply the best out of a pretty bad bunch. The Chinese don’t like their dependence on the dollar and they are seeking to break it, piece by piece.
I don’t think RMB will replace the dollar in the short or medium term, but I suspect the Chinese are moving slowly to offset their exposure to the dollar, and for them it is a long term project.
What I didn’t explain is that the Chinese are seriously considering trading with selected Asian nations in RMB, so the expectation is that they will apply the lessons learned in Africa to trade with those nations.
As I earlier stated, it is incumbent upon the West to put its fiscal house in order. The British economy is too small for the pound to carry weight, the Euro is in crisis and the dollar is simply the best out of a pretty bad bunch. The Chinese don’t like their dependence on the dollar and they are seeking to break it, piece by piece.
And, yes, I am aware of other places where China will use the RMB, starting with Asia. But also Latin America and Russia. And, of course, Africa using what they learned with these other parts of the world.
And yes, the Euro and the dollar are the only two currencies that have any significant weight in the world with the dollar being the healthier of the two. The other currencies are based on smaller economies; the Japanese yen, Canadian dollar, Swiss Franc, Australian dollar, and of course, the British pound.
The Chinese, like most nations, use the US dollar as a reserve currency and also to settle trade transactions. And, as you said, the Chinese don't want to depend on the dollar for her economy, especially for trade transaction. So, therefore, China must try to make her own currency an international or "hard" currency to circumvent the dollar in international trade.
Its a generation away for the yuan to be fully accepted as the dollar. But China is currently taking the necessary steps.
What’s the benefit to African countries of trading in RMB?
Trade between China and Africa is growing at a rapid pace. Apart from trade in Oil and Gas and a few high technology goods, most of the day to day goods used in Africa come from China.
Therefore, why not cut out the middle man. Look at this scenario: you are an African business man and you buy goods from Shenzhen from a Chinese partner. You first convert the local currency to dollars and then from dollars to RMB. (The dollar may be dropping in value in the States and Europe, but it is rising in value in many African nations due to the pressures imposed on it by Africa - China trade).
Therefore, it is better for African business people engaged in trade with China and vice versa, to convert directly from local currency to RMB, cut out the added cost of dollar conversion and reduce the costs of doing business.
There is a lot of pressure on the dollar in many African nations - Crude oil sales are calibrated in dollars, imported goods are bought with dollars and external reserves are kept in dollars. Too much local currency chasing too few dollars leads to a drop in the exchange rate of local currencies with respect to the dollar and a resultant increase in the cost of doing business.
In a nation like China that relies heavily on the export of manufactured goods, a weak currency policy is an advantage. Africa, in contrast manufactures very little and exports even less manufactured goods. Africa is heavily dependent on the export of commodities, import of manufactured goods (largely from China) and consumption.
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