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Scoop.it!
The modernisation of China’s exchange-rate system could deal the currency a painful blow 
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Scoop.it!
America enjoys an exorbitant privilege from the fact that the dollar is the world's reserve currency. China would like its currency to have the same status. Asia markets correspondent Hudson Lockett explains what China needs to do to make it happen.
Graham Watson's insight:
This clip looks at an increased demand for Chinese assets, and by definition the renminbi. However, as yet, it is unlikely to be able to rival the dollar as the global reserve currency just yet. This position gives the US certain advantages, not least the ability to run trade deficits, but also a reduction in exchange rate uncertainty for US firms.
Despite increased demand for renminbi, the unwillingness of the Chinese government to relax its control over the supply of renminbi means that it's not currently in a position to rival the dollar.
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Kenneth Rogoff argues that we're within sight of a time when the US dollar is going to be challenged by China, and the rise of the renminbi.
If China stops pegging its currency to a basket of currencies, and adopts an increasingly modern monetary policy regime with inflation targeting and a free floating currency, then might it threaten to become the global reserve currency - although just not yet.