Beijing accumulates minerals to substitute the dollar with the Yuan
Beijing (AsiaNews) – China is buying up increasing amounts of minerals in an attempt to circulate its currency and save itself from inflation linked to the dollar. Many experts are forecasting that in a short space of time Beijing will have established the Yuan currency as a global reserve currency, taking over from the US dollar. For the second successive month now China has accumulated iron ore in its ports. In April ships unloaded a total of 53.3 million tones of iron ore in Chinese ports, in March 51 million.
The State Reserves Office has also announced that China is accumulating enormous quantities of other minerals, - such as copper, nickel, zinc, aluminium, titanium,.. – in measures that far exceed industrial or commercial demand. As previous reported by AsiaNews, China is also increasing its gold reserves (ref. 24/04/2009 China increases its gold reserves and 30/01/2009 And what if China starts buying up gold).
According to many experts these acquisitions represent Beijing’s attempts to diversify its portfolio, which still today depends largely on the US dollar. With the current economic crisis in the United States, China fears the dollar will drop and as a result Chinese wealth be reduced to nothing. This is why on one hand Beijing is strengthening its reserves while at the same time developing the use of the Yuan in trade. Up until now the Yuan traded at a fixed rate to the dollar and its exchange was linked to very few currencies.
Since December Beijing has signed deals with other nations (Indonesia, South Korea, Hong Kong, Malaysia, Bielorussia and more recently Argentina) allowing the Yuan to be used as the trading currency. Neighbouring nations are also permitted to use the Yuan. Hong Kong, but also Shanghai, Guangzhou, Shenzhen, Dongguan and Zhuhai can from now on use the Yuan to make foreign payments. This allows them to avoid fluctuating exchange rates due to the worsening situation of the dollar.
Already on March 24th last, on the website of the Chinese Central Bank, the governor Zhou Xiaochuan claimed that the global currency system “dreams of creating a global reserve currency, that is detached from single nations and capable of remaining stable in the long term, thus eliminating deficiencies caused by the use of national currencies based on credit”.
Experts see China’s moves as an attempt to give the Yuan international value, in order to have a more powerful voice in the case of the G20 or should others attempt to establish a single world currency.
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