Friday, August 27, 2010

China Flexes Its Currency Muscles

(Joong Ang Daily)

Beijing took an important step last week by turning the renminbi into a global currency

China has now surpassed Japan in terms of nominal second-quarter gross domestic product, emerging as the world’s second largest economy after the U.S. The news is hardly surprising. It had been widely expected and was just matter of time.

But the global market was enthralled with different news from China last week. The People’s Bank of China announced on Monday measures to liberalize the bond market, allowing foreign central banks and commercial banks to invest their yuan holdings in sovereign debt as well as corporate bonds on the Chinese interbank bond market. The world’s second largest economy is now pitching its debt as equally attractive as U.S. Treasury bonds. The goal is to widen the international role of the Chinese currency and make it as accessible as the U.S. dollar. Read more here.