On the Issue of International Currency, Internationalization of Yuan and Settlements by National Currencies
V. Y. Cherkasov
Financial Research Institute of the Ministry of Finance of the Russian Federation
Keywords: ключевая международная валюта, юань, интернационализация, национальные валюты, международные расчеты, трансграничные платежи, Vehicle currency, yuan, internationalization, national currencies, international settlements, cross-border payments
Abstract
Shifts in the global landscape entailed a critical look at the existing currency composition of international settlements. But global vehicle currencies are those thathave a set of properties minimizing transaction costs. Here, not much has changed since the appearance of the earliest theories (Swoboda, 1968). A great deal of workhas been done to create a system of settlements by offshore yuan, but it is still a currency isolated from the onshore renminbi. China’s ambitions on vehicle role ofyuan are overestimated. The country settles imports by national currency, being ready to open selectively its financial market in this favor.Quest for an alternative to the dollar as a vehicle currency seems not to be a productive agenda but «underutilization» of a number of currencies is a problem. The ruble remains underutilized but with its current 15-30 percent weight in exportreceipts and import payouts there is no simple answer to the question whether competition could push it up further. However, considerations of a different kind arebecoming significant. These are integrating role of Russia in the region of Eurasia and risks arising with geopolitical tensions. The SDAC’s integrated regional paymentsystem SIRESS seems like a good example regional network, while Chinese DomesticForeign Currency Payment System gives an example of increased security of foreign currency transfers inside the economy.
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