China for a long time has been seen as a mere contender for a seat on the table of global economic power alongside the United States. But, is that the only real intention behind the Chinese aggressive push for economic expansion? Or does the Chinese government envision replacing the US dollar with its Yuan as the primary reserve currency of the planet?

Let us first see if it is even remotely possible for China to replace the reigning US Dollar with the new found vigor of its Yuan. China had established an offshore renminbi inter-bank market in Hong Kong with the goal of opening up its currency as a global trading currency. China, of late, has shown an acute desire to replace the United States as the global economic power. To achieve this, China is slowly shifting its economic growth from one that is merely export driven to a consumer-driven economic growth. This is easily accomplished by allowing Yuan to appreciate slightly and by making the Renminbi an internationally freely convertible currency. Now, once these objectives are achieved there is no stopping china from overthrowing the US Dollar from its throne of superiority and domination.

Many experts in Forex market also aver that this is quite a possible event. John McCormick of RBS Group recently noted that- “Financial crises in the US and Europe mean the world needs a new, more stable global reserve currency, and trade in RMB is growing rapidly. In the FX market, for example, our figures show that volumes are now worth around USD 5-6 billion daily – double what they were a year ago. A number of factors suggest that the Chinese authorities want to make RMBinternationalization happen by 2015.”

What McCormick says is very true in the present scenario of the world economy. With the US struggling to prop up its failing economy and the other important European economies in the doldrums, the whole world has no other choice but to look for a new global economic leader. China’s global economic influence has been on a rapid and steady growth for the past decade. China has already edged past the US as the biggest Global trading nation. According to reports, the US exports and imports for the last year is pegged at $3.82 trillion by the U.S. Commerce Department. While the Chinese customs administration reports that their country’s trade for the year 2012 amounted to $3.87 trillion, making China the nation with the highest Global trade. 

(To be continued…….)