By Eugene Tang
Bloomberg News
Saturday, April 11, 2009
http://www.bloomberg.com/apps/news?p...
China's government should push ahead with its plan to make the yuan fully convertible so that it can one day stand with the U.S. dollar and euro as one of the world's three most-used currencies, a top researcher said.
"In the ideal world, the yuan fulfills all the conditions as one of the world's three most influential currencies, except it's currently not convertible," said the Chinese government's central policy research deputy director Zheng Xinli, at a financial conference today in Beijing. "That's why we need to push ahead with our currency reforms and broaden the currency's usage and acceptance internationally."
The global financial crisis is an "opportunity for the yuan to elevate itself to the next level," said Hou Yunchun, deputy director of the State Council's research office, at the same forum today. "We should push ahead with reforms to overtake" other currencies, he said.
China, the world's largest holder of U.S. debt, wants to urge global holders of Treasuries to demand the U.S. government to tie their purchases to inflation, Zheng said.
"Those governments that have foreign reserves, especially those holding Treasuries, should demand that the U.S. link the purchases of Treasuries with inflation," he said. "If the dollar depreciates and there's inflation, the U.S. should pay more according to inflation. I think that's reasonable."
The world financial system should explore the use of the special drawing rights under the International Monetary Fund as an alternative to the dollar as the global reserve currency, he said, reiterating an idea proposed last month by Chinese central bank governor Zhou Xiaochuan.
