Why ASEAN plans to use Yuan as alternative currency?
Some background of YUAN movement:
- In July 2009, 5 major trading cities, including Shanghai and Guangzhou, have received the nod from the Chinese central government to use the Yuan in overseas trade business, seen as one more step in China’s moves to expand the use of its currency globally.
- In Oct 2009, the first China-ASEAN Summit Forum on Financial Cooperation & Development, China is set to use the ASEAN meet to sell the idea of making the Yuan an international currency. It is using the sense of uncertainty over the US dollar to sell a new dream of enlarged regional trade, financial support from Beijing and reduced dependence on the volatile dollar. China has also offered to contribute nearly one-third of the $120 billion economic stimulus package being worked out by ASEAN with the stated purpose of helping member-nations reduce their dependence on the International Monetary Fund. Japan offered to cough up a similar amount so that its influence in the region is not diminished.
- In Oct 2010, the 2nd China-ASEAN Summit Forum on Financial Cooperation & Development, which was held during the Expo, that the establishment of the CAFTA not only laid a solid foundation for the regional development of financial cooperation, but also signals great potential for future financial cooperation between China and ASEAN countries.
- China, Japan, South Korea and Southeast Asian governments ordered their finance ministry deputies to study using regional currencies for settling export and import orders, they said in a joint statement in May this year.
Large amount of trad between ASEAN and China: ASEAN exported more than $230 billion of goods to China in 2010, Siregar said.
Weakness of US Dollar compare to YUAN: Within the last 12 months, YUAN shown their strength vs Dollar 1USD = 6.80 Yuan to 1USD = 6.40 Yuan.
If we look back to the last 10 years, YUAN maintain the rate from 2001 up to 2005 (1 USD = 8.25 Yuan) and start beat Dollar from the middle of 2005 nearly 18% until 2008 (1 USD = 6.8 YUAN) and nearly 6% for the last year (1 USD = 6.4 YUAN).
The rise of the use of the YUAN in trade may help ease the impact of a future financial crisis, after a shortage of dollars during the 2007-09 credit collapse hobbled commerce across the globe.