Yuan Deposes Dollar on China's Border in Sign of Future for Global Trade

Yuan Deposes Dollar on China Border in Sign of Future (Update1)
By Bloomberg News


July 8 (Bloomberg) -- Huang Xinyuan, who sells mining equipment and pesticides to customers across China’s border with Vietnam, says he no longer wants payment in U.S. dollars and prefers the yuan.

Sales using the greenback at Guangxi Jinbei Group, where Huang is vice president, dropped to 30 percent of contracts in 2008 from 87 percent in 2007. The yuan, which has gained 21 percent since it was allowed to strengthen against the dollar starting in 2005, offers greater stability, he said.

“In recent years, the dollar has gone in only one direction and that is down,” said Huang, 45, in his second- floor office in Pingxiang, a town set amongst karst limestone hills and sugar-cane fields in China’s southwest Guangxi Zhuang Autonomous Region, three kilometers (1.9 miles) from Vietnam. “Settling our orders in yuan removes a major risk.”

China expanded yuan settlement agreements last week from border zones to its largest financial centers, including Shanghai, Guangzhou and Hong Kong. The program is being rolled out across Malaysia, Indonesia, Brazil and Russia, all nations seeking to reduce the dollar’s role as the linchpin of world finance and trade.

The central bank first brought up the concept of a supranational currency to replace the greenback in reserves in March. It will sponsor use of the yuan in trade by arranging export tax rebates. Russia and India said the global financial crisis had highlighted the dollar’s flaws and called for a debate before the Group of Eight leaders meet in L’Aquila, Italy, starting today. .......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601109&sid=aqA9QhRSNeqM

Hopefully, they will continue to do so quietly and slowly. They are doing it because the dollar is overvalued and they are swimming in them. They are using the dollars to buy up oil contracts, mineral rights, and just plain property around the world at low prices. Also, they are investing in infrastructure.

They want to keep it propped up for their own financial reasons but are facing the reality of it's inevitable devaluation.