Compiled by English desk

From Caijing Online 
 

China’s yuan has met three out of five market conditions for upstaging the U.S. dollar as the standard international currency, which is a Chinese government goal, according to a Beijing university expert.

Li Daokui, director of the China and World Economy Research Center at Tsinghua University, made the comment based on the recent G20 summit in Washington attended by Chinese President Hu Jintao and a decision by the Philippines central bank to include the yuan in its foreign currency reserves.

Li called the goal of making the yuan the global standard “a beautiful vision”, although he said a worldwide switch to China’s currency from the dollar will take time.

In an interview with Caijing, Li also said he doubts the euro will replace U.S. dollar as the dominant currency since “an international currency is essentially the result of economic strength.”

But the yuan is on its way. The currency has met some requirements through its role in China’s sizable economy, its use in a wide scope of trade, and because its value has been appreciating steadily.

Li said the yuan falls short because its exchange rates are not set on the open market, and because China’s financial market is immature. The nation’s financial sector currently lacks the kind of stability that would bring short-term capital flow under control.

The Filipino government’s decision, however, suggests the yuan’s influence is growing.

“The new world financial paradigm is not dependent on negotiation or by declaring who is to replace the U.S. dollar,” Li said. “Rather, it is dependent on strength.”

Moreover, in Li’s view, the G20 financial summit showed China has set a goal to gradually promote its currency as the international currency.

Chinese leaders demonstrated at the summit that China has a sense of responsibility for international affairs and wants a stable international financial framework, Li said.