Can China's Currency Go Global? (Economic Outlook‪)‬

During his recent visit to the United States, Chinese president Hu Jintao asserted that the global financial crisis reflected "the absence of regulation in financial innovation" and the failure of financial institutions "to fully reflect the changing status of developing countries in the world economy and finance." President Hu called for an international financial system that is "fair, just, inclusive, and well managed." (1) Among President Hu's assertions was the claim that "the current international currency system is a product of the past." (2) More specifically, he has been critical, along with other Chinese officials, of the primacy of the US dollar as a reserve currency and its use in international trade and investment. This criticism, coupled with the observation that China has rapidly become the world's second-largest economy, has made the internationalization of its currency--the renminbi (RMB), alternatively known as the yuan--a widely discussed topic. (For one of the more noteworthy articles, see "Yuan Direction," an analysis published in the Financial Times on December 14, 2010.)