Commentary: If There Is No Support For Gold, Will There Be Risks In The Internationalization Of RMB?

< p > in this year's government work report, Premier Li Keqiang said when deploying the "key work in 2014", we should expand the two-way floating rate of exchange rate and promote RMB capital account convertibility.

The issue of a href= "http://www.91se91.com/news/index_cj.asp" > exchange rate < /a > and "capital account" is a key part and the most fundamental part of the internationalization of RMB, but there are more important things to do in the internationalization of RMB.

< /p >

The recent P incident in Ukraine has also served as a warning to China.

After the United States appealed for sanctions against Russia, the Russian stock market plunged 13.5% on the first day of opening (March 3rd), and the rouble fell sharply.

In order to curb further decline of the rouble, the Central Bank of Russia sold $10 billion of foreign exchange reserves in one day and raised interest rates sharply (from 5.5% to 7%).

< /p >

Russia, as a country with 500 billion or 1000 tonnes of gold reserves, is also hard to stop the turmoil in its currency and capital markets in an emergency.

This gives the global market a better understanding of the strategic risks posed by the "dollar economy".

High foreign exchange reserves do not necessarily guarantee financial and economic security, and no matter how much foreign exchange reserves the state can not independently "manufacture" and control the US dollar, they are faced with the same risk.

< /p >

There will not be third possibilities for the internationalization of RMB P. After its "a href=" http://www.91se91.com/news/index_cj.asp "internationalization" (/a), it will become the real international currency which is in line with the euro and the US dollar and divide the share of the international reserve of the US dollar, or it can only become an International second-class currency, which is not controlled by itself or the speculators of the world, such as the Japanese yen, which is attached to the US dollar.

On the issue of international currency, the US dollar can not "decline peacefully". If the RMB does not adopt the internationalization measures linked to gold (not only to have a large amount of gold reserves, but also need to be linked to gold), it will not be enough to rely solely on total trade volume and economic influence.

< /p >

There are two major advantages of the "P" RMB. One is that the United States is China's debtor nation, and that the debts it owes may not be clear for decades. This is similar to that between the United States and Britain after World War II.

The second is that China has become the largest cargo trading country in the world and has the initiative to choose other international settlement currencies.

But the only disadvantage is that China's national gold reserves are so small that it can not guarantee its credibility after it is linked to the renminbi.

< /p >

< p > at present, the development of < a href= "http://www.91se91.com/news/index_cj.asp" > RMB > /a "has been developing smoothly. However, the RMB has not really entered the international market. If the credit of the renminbi is not supported by the state, there is no gold as a tactical tool to support it, and its regulation cost is very high.

Just like the yen, intervention in the past exchange rate needs only hundreds of billions of yen, and now it needs trillions of dollars or even trillions of yen. The cost of regulation is higher and higher, but efficiency is getting lower and lower.

< /p >

< p > assuming that the central bank's gold reserves exceed 20 thousand tons, the way that the central bank regulates domestic and foreign RMB liquidity can be completed by releasing gold reserves and gold recovery, reducing the non market nature of direct monetary price and quantity intervention, and selling and refinancing of gold is a complete market-oriented operation.

< /p >

"P > gold" is always a means of payment in the international market, and China needs a bold policy of internationalization of the RMB.

Adopting the gold standard is not without maneuverability. In the face of the complex market at home and abroad, China can adopt a dual currency structure and divide the renminbi into "Renminbi notes" and "Renminbi gold coins". The credit of Renminbi notes is borne by the state, mainly in China. Gold coins are linked to gold in addition to the national credit guarantee, and financial institutions act as members of the "gold international board" market in the Shanghai free trade area, forming a fully convertible settlement and reflux mechanism of "RMB gold coins" and "Renminbi banknotes". The gold coins are mainly used for international trade and serve as international reserve currencies.

< /p >

< p > in the modern world where the dollar penetrates all corners of the globe, giving up the dollar will cost a lot, but the cost of not abandoning the dollar may be even greater.

< /p >