April 6, 2009

Swapping the Currencies

China is walking their talk. Time reports:

In the past two weeks, China signed multibillion-dollar currency-swap agreements with Indonesia and Argentina that effectively allow Beijing's two trading partners to bypass the dollar as a medium of exchange. The deals followed similar swaps China has hammered out over the past six months with Malaysia, Hong Kong and South Korea. The combined value of the various swaps — which enable the central banks of China's trading partners to sell yuan to local importers to buy Chinese goods — is nearly $100 billion.

However, without free trading of the yuan and fluctuations of its value, it is difficult for countries to benefit from holding the Chinese currency, hindering the government's aim to make it a world currency. The yuan still has a long way to go.

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