ASEAN Experts: Yuan to Replace U.S. dollar, Euro

From Xinhua,

China's currency could be eventually used as an alternative to the U.S. dollar and Euro by southeast Asian countries, experts said.

Phathanaphong Phusuwan, a senior official of the Bank of Thailand, said in a seminar on Thai-Chinese trade, investment and finance relations on Saturday that the yuan would likely be used more between China and ASEAN member states in the long run.

In the panel discussion co-hosted by the National Research Council of Thailand, Huaqiao University and the Thai-Chinese Culture & Economy Association here, the official of the Thai central bank commented the Chinese currency could possibly replace the U.S. dollar and Euro when it comes to trade, financial and money-exchange dealings throughout the ASEAN community, due in part to the unresolved economic and financial problems in the United States and the European Union.

"In the long run from 2015 onwards, trade with Asia will largely increase under the ASEAN-China Free Trade Area agreement, which will influence the use of the yuan and the local currencies. The yuan is then a good alternative for the international trade in the future," said the official, referring to the year in which the regional bloc will become an ASEAN Economic Community.

Nevertheless, he said, the role of the Chinese currency in Thailand and other ASEAN states will remain limited in the short and medium terms.

Thai merchants have increased their use of the yuan in trade, following the easing of restrictions by the Chinese government, he said. A dozen Thai commercial banks and foreign banks' branches here currently offer yuan-based services, including foreign currency deposits, money exchange, fund transfers and purchases of Chinese banknotes.

The Chinese currency has accounted for 10.8 percent of China's trade dealings with the world during the first half of this year, according to a report of the Thai central bank.

ASEAN’s plan to embrace free trade with China should be welcomed.

Yet the above again reveals of the (economic) love –(geopolitical) hate relationship between ASEAN and China.

While free trade may increase the usage of China’s yuan for trade and finance within the region, the role of the yuan as ASEAN’s reserve currency is not guaranteed. This will ultimately depend on the interplay or action-reaction feedback by global participants, not limited to politicians.

For instance, if China’s slowdown turns into a hard landing, what will be the response by the Chinese political authorities? If China inflates as massively as their counterparts in the West, then the likelihood of concerted massive inflation by major economies may mean, hardly a yuan standard for ASEAN, but of a potential return of the role of gold as money (I just don’t know how this would take shape; perhaps a modified Bretton Woods standard?).

Or if China adapts protectionism or goes into a shooting war over territorial claims with ASEAN neighbors then the free trade agreement will simply evaporate or reneged upon. [As a side note, the geographical claims dispute, for me, has most likely been a False Flag]

Given that current political and economic events remain so fluid and sensitive or vulnerable to dramatic changes, it would be a mistake to read present trends into the future.

Although I am hopeful that the technology backed globalization and decentralization will become the dominant force overtime. As well as, I am hopeful of the return of sound money or the de-politicization of money.