27th Sep 2023

Chinese yuan to be convertible with euro by 2015

  • China aims at making the yuan a reserve currency like the euro (Photo: EUobserver)

China is seeking to make its currency fully convertible by 2015, officials said in Beijing, a move which may help the ailing euro and dollar, which are losing against an under-valuated yuan.

Chinese officials told the EU business community in Beijing that the yuan will achieve "full convertibility" by 2015, Davide Cucino, the head of the EU's chamber of commerce in China said in a press conference on Wednesday (8 September).

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“We were told by those officials by 2015,” Cucino said, as quoted by the Bloomberg news agency. The process will be a gradual one, he added.

A similar timeline is being floated by Asian currency experts as well. "It's not beyond imagination that the renminbi could become fairly, if not fully, convertible in the next five years," Monish Mahurkar from the Asian Development Bank said during a conference in Hong Kong, Dow Jones reports.

Currently, the Chinese yuan (RMB - remnibi) is held within strict margins by the People’s Bank of China, which sets a rate each morning around which the currency can trade. This policy has for a long time prompted criticism from Europe and the US that the remnibi is under-valued, hurting European exports, among others.

China, the second-largest economy in the world, also limits conversion of the yuan for investment purposes. But by 2015, this may change, allowing the remnibi to become a reserve currency alongside the US dollar and the euro.

Chinese Vice Premier Wang Qishan is due to meet British chancellor George Osborne on Thursday in London. According to the Financial Times, Wang will back efforts by British banks to establish a yuan offshore trading center in London’s financial district.

Chinese ratings agency

Meanwhile, China’s Dagong ratings agency put forward plans to expand on an international level and strengthen ties with the world’s three largest graders of debt - Standard & Poor's, Moody's and Fitch.

The China Daily newspaper reported that Dagong CEO Guan Jianzhong hopes the planned new agency will obtain a leading position in the rating market within the next five years. The company will be set up branches in Europe, the US, Brazil, Russia, India and South Africa, the paper said.

Founded in 1994, Dagong has already had co-operation with overseas ratings agencies in Japan, South Korea and Brazil. On 3 August, Dagong cut its sovereign rating for the US by one notch to A, on a par with Russia and South Africa. Two days later, Standard & Poor's followed suit, cutting America's triple-A rating to AA+ and causing a storm on financial markets.

EU officials have repeatedly criticised the quasi-monopoly of US ratings agencies, whose scathing assessments of euro-countries' capacity to pay back their debt has inflamed markets and contributed to the skyrocketing debt costs for Greece, Portugal, Italy and Spain.

But Dagong has made similar moves, even as it maintains higher ratings for the euro-countries than the 'big three'.

Following the 21 July deal on a second Greek bail-out, Dagong said that "the new rescue plan is expected to prevent Greece from unilateral default by 2014, but the solvency of the state thereafter is still not encouraging."

But it welcomed the agreed changes to the eurozone bail-out fund (EFSF), saying that if approved, the measures "will enhance the ongoing credit ratings of other members in the eurozone."

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