Home' Trinidad and Tobago Guardian : February 12th 2015 Contents FEBRUARY 2015 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG19
Within the next ten
years the world com-
expect China s Yuan
(also called renminbi)
to be as widely used
as the United States dollar. For almost a decade
now the Chinese currency has been popular
with neighbouring countries which, along with
China, are among the fastest growing
economies. Now, the yuan is becoming popular
with Western countries too as their trade with
China increases and they target the Chinese
market for investment and tourism.
In a report entitled, "Global Development
Horizons 2011: Multipolarity---The New Global
Economy", the World Bank predicts that the
US dollar will lose dominance by 2025 and a
multinational system centred on the dollar,
the euro and the yuan will replace it. The
bank s prediction is sure to be realised as China
works diligently to get the yuan into the basket
of currencies that comprise the Special Drawing
Rights of the International Monetary Fund
(IMF) by 2020.
Only four currencies now form part of the
existing IMF basket. These are: the US dollar,
the euro, the British pound and the Japanese
yen. In 2020, the IMF will undertake its five-
year review to decide which currencies should
be in the basket. It is almost a foregone con-
clusion that the yuan will be amongst them.
There are three very strong indicators of
why this is likely to happen.
First, China s overseas investment will reach
US$1.25 trillion in ten years time; it will be
second only to the US.
Second, offshore yuan reserves are currently
at US$319.7 billion and rising.
Third, China s UnionPay debit card, which
was introduced in China in 2002 as a domestic
credit and debit card, has now spread as a
credit card to over 140 countries. Some banks
in major capitals of the world also accept
UnionPay debit cards at their automatic teller
machines (ATMs), including in the United
States. Eventually, these cards will become as
widely used around the world as US and Euro-
Research by this writer does not reveal any
banks in the Caribbean currently providing
for the use of UnionPay credit and debit cards.
However, as China s trade and investment
increases in the region, this is certain to change.
The commercial banks in the Caribbean that
work to tie-up early arrangements with China s
banks and the Central Bank of China should
China s trade and investment in the region
have risen exponentially since 2005 and there
is every indication that they are increasing.
With more business being done in the
Caribbean by China, the requirement for the
use of UnionPay credit and debit cards is sure
The number of Chinese tourists to global
destinations is also growing every year, though
not so for the Caribbean. The number of Chi-
nese tourists to Caribbean countries is too
miniscule for statisticians to record. Indeed,
the only two cities in Latin America and the
Caribbean that managed getting the statisti-
cians attention for 2013 were Sao Paulo and
Rio de Janiero in Brazil, but they were low
down in the list of destinations.
Topping the list were nearby countries such
as Indonesia, South Korea and Japan. New
York was the sixth most popular destination
number of tourists (646,000) paled in com-
parison to nearby countries such as South
Korea (4.3 million).
The Caribbean is unlikely to share in the
Chinese world-wide tourist spending, esti-
mated at US$129 billion in 2013, until the
countries of the region gear their tourism
product for Chinese. This will be a long time
in coming and will require considerable plan-
ning and investment.
Still, if the Caribbean secures a small per-
centage of Chinese tourism spending, forecast
to be US$310 billion in three years time, the
region would improve its foreign exchange
earnings and employment substantially. The
prize is worth the pursuit.
But, even if Chinese tourism to the
Caribbean does not dramatically increase, trade
with, and investment from, China surely will
bring greater influence of the yuan in the
region s business.
There is no stopping the rise of the yuan
and its importance as a global currency.
China s overall GDP growth rate for 2014
slowed to 7.4 per cent; its slowest in 24 years,
but impressive enough for it to be envied by
the majority of the world s nations. The Chi-
nese government is calling its present economic
circumstances "the new normal".
In January, the Central Bank eased restric-
tions on the amount of reserves of commercial
banks. Six hundred billion yuan (US$96 billion)
or more held in reserve at Chinese banks were
released with the expectation that two to three
trillion yuan will be injected into the economy
to stimulate growth. A significant sum of that
money is also earmarked for increased invest-
ment in the productive sector of other coun-
tries, particularly in Europe and North America,
in anticipation of huge returns.
The IMF now ranks China as the number
one economic superpower. It reports that
China produced 17 per cent of the world gross
domestic product (GDP) in 2014 exceeding
the United States by one per cent.
Experts argue that China will maintain its
lead in economic ranking of GDP in the fore-
seeable future largely due to catch-up of its
per capita income which is rising annually at
8.0 to 10 per cent. While the income of the
average Chinese citizen will lag behind the US
for many years to come, the point is that as
a country China is---and will continue to be---
a significant influencer of growth for the rest
of the world.
If, as expected, the yuan does become one
of the IMF s basket of currencies for Special
Drawing Rights and rivals the US dollar as a
global currency, developing countries, which
have to use foreign currencies to carry out
transactions with the rest of the world, will
have to factor the Chinese currency into their
thinking, including whether or not to peg their
currencies to the US dollar or opt for a link
to the same basket of currencies that the IMF
The writer is a consultant, senior fellow
at London University and former Caribbean
China's yuan will rival US$ globally
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