Yuan zone

[UPDATE-- 7:30PM:
Check out the styles at the Great Hall of the People:

Hu is before Wen with Wu on his heel, but they are all Mr Red:

Top Communist Party of China (CPC) and state leaders Hu Jintao (C, Front), Wu Bangguo (3rd R), Wen Jiabao (3rd L), Jia Qinglin (1st R), Li Changchun (1st L), Xi Jinping (4th L), Li Keqiang (4th R), He Guoqiang (2nd L) and Zhou Yongkang (2nd R) walk to attend the opening meeting of the Second Session of the 11th National People's Congress (NPC) at the Great Hall of the People in Beijing, capital of China, March 5, 2009. (Xinhua)

Reservoir Dragons.


Financially torturing and economically executing their way through corporate America in order to loot it. And they don't believe in tipping either. -- UPDATE ENDS].

Yesterday the Beijing leadership was making the loudest noises yet about the nascent Chinese East-Asia co-prosperity sphere Yuan zone I posted about on Boxing Day. It slid under the radar as the Chinese released the news of their intent very quietly when the West was on holiday. With the recession biting and the US on its knees there seems to be pressure building and a sense that now is the time for China to move.Xinhua reporting:

BEIJING, March 6 (Xinhua) -- Four commercial banks could begin offering yuan-denominated settlement of some of China's international trade deals as soon as March, the central bank said Friday.

Zhou Xiaochuan, head of the People's Bank of China (PBOC), said that a policy for settlement of Hong Kong-mainland trade denominated in the yuan would be released soon. He made the comment at a press conference on the sidelines of the annual session of the National People's Congress, or the parliament.

"It won't be long before the policy can be made public," Zhou said.

PBOC sources said Thursday the names of the four banks, two domestic and two foreign, would be officially disclosed this month. They said two of the banks were based in Shanghai.

Other officials have also mentioned the issue this week.

Donald Tsang, Chief Executive of the Hong Kong Special Administrative Region (SAR), said he believed yuan settlements for trade would soon be possible in Hong Kong. Tsang spoke during his visit to Beijing for the legislative session.

And Premier Wen Jiabao said Thursday in his government work report that the mainland would expedite trials of yuan-denominatedtrade settlements with Hong Kong and Macao this year.

These are huge moves - not because the volumes to start with will be large in a global sense, but because of what China's aspiration to create a reserve currency will mean in the long-term, especially the fate of the American dollar and where that fits in with arguably the more likely future reserve currency - the Euro.

Today the state news agency, Xinhua, is reporting:

BEIJING, March 7 (Xinhua) -- China should speed up reforming its financial system to make the yuan an international currency, said political advisors Saturday.

"A significant inspiration to draw from the global financial crisis is that we must play an active role in the reconstruction of the international financial order," said Peter Kwong Ching Woo, chairman of the Hong Kong-based Wharf (Holdings) Limited.

The key to financial reform is to make the yuan an international currency, said Woo in a speech to the Second Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), the country's top political advisory body.

That means using the Chinese currency to settle international trade payments, allowing the yuan freely convertible on the capital account and making it an international reserve currency, he said.

China's yuan, or Renminbi, can be freely convertible on the current account but not on the capital account, preventing it from being a reserve currency or a choice in international trade settlement.

China has announced trial programs to settle trade in the yuan, a move analysts say will facilitate foreign trade as Chinese exporters might face losses if they continue to be paid in the U.S. dollar. The dollar's exchange rate has become more volatile since the global financial crisis.

Economists say the move will increase the acceptance of the currency in Asia, which will help it become an international currency in the long run.

The status of the yuan as an international currency will benefit China by giving it a bigger say in world financial issues and reducing the reliance of its huge foreign reserves on the U.S. dollar, some analysts say.

Other analysts argue a fully convertible yuan will hurt China as it would allow massive capital outflow during a financial crisis.

Meanwhile, Chinese authorities remain cautious.

The Economist on China's budget:

IN HIS first state-of-the-nation speech since the global economic slump began battering China late last year, Wen Jiabao, the prime minister, painted a grim picture of the troubles ahead. With the help of massive government spending, China was still aiming for economic growth of 8% this year, he said on Thursday March 5th. But he revealed few new ideas about how this is to be managed.

At the opening of the annual session of China’s parliament, the National People’s Congress (NPC), Mr Wen said that China was facing “unprecedented difficulties”. But his speech revealed nothing of any stimulus plans beyond the 4 trillion yuan ($585 billion) in spending announced in November last year. Vain hopes for a new package had helped briefly to buoy global stockmarkets.
[...]
China’s armed forces, pampered by double-digit annual increases in spending for 19 of the past 20 years, get a raise of around 15%. This is down from nearly 18% last year and could be intended as a sign that in these hard times welfare-related programmes have a higher priority. But the defence budget is so opaque that the government’s figures have to be treated with enormous scepticism. The army will stage a vast parade through Beijing in October to mark 60 years of Communist rule. A big naval review is also planned for April. The cost of these is secret.
[...]
The government will be relieved if delegates keep debate to a minimum. It worries that a slowing economy might trigger an explosion of discontent among the fast-growing ranks of the unemployed. The fear is that open dissent in the ranks of party-picked legislators could make things worse. It also frets that, like last year, the NPC meeting could be overshadowed by unrest in Tibet. March 10th marks the 50th anniversary of an uprising against Chinese rule and security forces in Tibetan areas are on full alert for possible protests. The public-security budget is due to rise by nearly a third this year, up from 9% last year. Mr Wen is preparing for the worst.