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Devaluation of USD vs. Internationalisation of RMB

08-18-2011 17:31 BJT

Vice President of the United States Joseph Biden has kicked off his six-day official visit to China. Topping his agenda is to boost China's confidence in US economy under the shadow of US sovereign credit rating being downgraded by Standard & Poor's and devaluation of USD.

As a coincidence, Chinese Vice President Li Keqiang began his tour in Hong Kong one day before Biden's visit, and unveiled central government's supportive measures to HK which mainly focused on building HK into an offshore RMB center. Turning HK into an offshore RMB center is regarded as a milestone in China's efforts to push forward RMB internationalisation which symbolizes China's strong engine of economic growth.

Special report on US debt crisis

"The U.S.' international position is not under immediate threat. But if the government doesn't consider reform and allows the situation to worsen, their national credit rating will be further downgraded, which could be a turning point in U.S. power." Zuo Xiaolei, chief economist of Galaxy Securities said.

Chinese experts say the relationship between China and the developed world has changed. China is transforming from the "world's factory", to the "world's market". The explosive spending power of the Chinese could help boost the flagging global economy. Meanwhile, China faces its own challenges about how to overhaul its export-driven economy into one boosted by domestic demand.

Under this new changed dynamic, analysts are calling on both sides to look at this relationship with new eyes. They say, cooperation is essential for mutual economic security.

Agenda of Biden's China Trip:

- To boost Chinese confidence in US economy
- To visit Wenchuan as good-will herald
- US arms sales to Taiwan: Core issue awaits Biden's response

Feature: RMB internationalization well underway

A report released by the HSBC on Wednesday said Li's announcement takes the RMB internationalization process to the next stage by enhancing onshore mainland entities' access to the offshore RMB market and by opening up more channels for RMB to flow back to the onshore asset markets.

"The rise of China's economy has won the worldwide acknowledgment, mainly in the real economy aspect so far, the next step naturally goes to establishing our position in the international financial field." Bajum Zhou, senior research fellow with the China Everbright Holdings said.

"The default risk of the Chinese government bonds is very low and the yuan is expected to further strengthen against the dollar, so we think the bond sales will be welcomed by the local investors," said Zhang Ying, a researcher at Bank of China (Hong Kong) Ltd.

Agenda of Li Keqiang's HK tour:

- Attend celebration of 100th anniversary of HK University
- Tour Hong Kong to learn about youth employment
- Visit Hong Kong financial facilities


Editor:Xiong Qu |Source: CNTV.CN

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