It may be jade rings and tourists now, but when will deals for barrels of crude oil be fixed in the Chinese currency?
(STR/Reuters)
By Leo Lewis in Hong Kong
Looming over a glass counter scattered with jade rings, the woman from Guangzhou finally reaches her decision: her fidgeting husband perks-up and begins noisy negotiations with the Hong Kong jeweller. A price is agreed, but instead of Hong Kong dollars, the deal is settled in mainland yuan.
Given the proximity of the border, there is nothing too surprising about the transaction, perhaps: for the sake of good business, three other jewellers along the same Hong Kong street cheerfully accept what are, never mind “one nation, two systems”, another nation’s banknotes.
But the casualness of the transaction raises a question which could first reshape the world of trade and later the geopolitical scene. It may be jade rings and tourists now, but when will deals for three million barrels per day of crude oil be fixed, not in dollars, but in the Chinese currency?
The immediate answer, probably, is that while such a day may still be some way off, it will arrive much sooner than New York, London and Tokyo would like to think. To become an international currency, the yuan would have to undergo a series of substantial technical alterations from its present status, not least becoming freely convertible like the dollar, euro, pound and yen.
For Beijing, there would be huge cost risks involved if the currency were suddenly flung to the full mercy of international markets. Such a calculated loss of control may simply prove intolerable to a government that knows no other way.
And yet three of the most vital ingredients for the yuan to become an international currency are quite visibly stewing away: opportunity, momentum and willpower.
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