The U.S. government is watching closely the movement of China’s national currency. The U.S. Treasury is of the opinion that the weak yuan might affect badly the global economy. So, the longer period of the downward trend might cause grave problems. The fact that Beijing gives up control over the currency market raises concerns, especially in case the Chinese authorities will talk about greater flexibility in the yuan’s movements at the same time, the Treasury Department said.
Last month, pursuing its monetary policy, the People’s Bank of China shifted the renmibi trading corridor to weaken the national currency’s rate. Now China’s trade partners cannot predict actions this Asian country will take next. However, some analysts have no doubt the yuan will be able to strengthen and end the year of 2014 with moderate increase.
Several large-scale projects and stimulating programs are going to be launched this year. Moreover, the ailing yuan might worsen the relationships with America, the key trade partner of China. The latter does not want to make things worse at all. The parties admit the problem does exist. The U.S. Treasury Department even proposed negotiating on the yuan’s issue at the upcoming IMF/World Bank meeting as well as at the G20 summit.
The national currency of China is about to be acknowledged global currency since it has every chance for it. But the renminbi will have to go through all the stages first: to get the title of the international trade-finance currency, then to be encouraged in cross-border investment, and finally to be established as a forex reserve currency.