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January 17, 2011 7:31 PM EST
Following China's announcement last Thursday that the country's qualified enterprises could conduct direct investment overseas using renminbi, Standard Chartered Chairman John Peace on Monday said the Chinese currency's role in global financial markets will be as important as that of the U.S. dollar in the near future.
Speaking at the Asian Financial Forum on Monday, Peace noted that "last decade was characterized by made in China; this one by owned in China; the next one: paid by China."
"I don't see [the yuan replacing[ the U.S. dollar... What I see is it will be as important as the U.S. dollar," Peace was quoted by Monday's Wall Street Journal. "But it won't happen in centuries. It will happen quite quickly," he said.
According to Peace, it will become more "attractive for businessmen to use [yuan[ for payments and investments" as trade between emerging markets in the Asia Pacific region continues to grow in the next five to 10 years.
One-third of China's cross-border trade might be settled in yuan by 2016 as the government pushes for the yuan's greater role in reducing reliance on the U.S. dollar, said Qu Hongbin, HSBC's chief economist for China.
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"China's currency has been under-represented in global trade and capital markets, when compared to its trade and economic scale. But triggered by various government measures, yuan-settled trade has been growing fast," Qu was quoted in last Wednesday's China Daily.
Professor Cheng Siwei, who was the Vice Chairman of the Standing Committee of the National People's Congress of China from 1998 to 2008, said the dollar would remain the world's dominant reserve currency for the short term, but its dual roles as a domestic and international currency were inherently contradictory. He suggested that special drawing rights-a synthetic international currency created by the International Monetary Fund (IMF) that Chinese officials have embraced-could play a greater role in terms of being used in central bank credit swaps.
"What we most want to see is robust growth" of the offshore yuan market in Hong Kong, Cheng added.
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