China has estabilished a clearing center for its money in the United States.
The Bannk of China's office in New York City is the first U.S.clearing center for the
renmibi. Chinese officeals made the announcement last week.
Some pwoplw see China's move as an attempt to show that the RMB, also known as the yuan,
is competitive with the U.S.dollar as a major currency. They say there is no reason
for China to have U.S.banks serving as clearing centers for its money.
Currently, there are clearing banks in a number of financial centers, including Hong Kong,
London, Singapore and Toronto.
On October 1, the RMB is to become the fifth currency in the International Monetary Fund's
frou[ of Special Drawing Right. The four others are the U.S.dollar,the British pound, the
Japanese yen and the euro.
Christope Balding teaches at Peking University. He says China is buying up avaliable RMB
on international markets in an effort to increase its value. He told that the value of
Chinese money would drop sharply if it were freely traded.
China's recent policy has been to keep the money stable to avoid sharp increases or
decreases in value against other currencies. The exchange rate is currently between six
and seven PRM to the dollar.
For many years, China has sought to make its money one of the important currencies of
international trade.
China's government faces a conundrum that other reserve currency economies have faced
in the past how to promote the currency's role in global finance without losing control
over the currency's value.
Some experts say Chinese efforts to control its currency are not meant to make the
country's exports less costly and, therefore, more competitive.
China is most interested in maintaining basic stability of its currency and limiting
volatolity.