January 18th, 2011
06:00 PM GMT
Beijing, China (CNN) - In a battle between the Chinese yuan and the U.S. dollar, which currency would you bet on? Currently, the dollar reigns supreme in the world of trade and finance. But HSBC economist Qu Hongbin told me, longer term, he would bet on the yuan.
The Chinese government is making a big push to raise the stature of its currency. Hardly anyone uses it outside China. But, with China's economy now the second largest, authorities here are actively encouraging business people to use the yuan. The government is allowing Chinese companies to conduct some international business in yuan. It is allowing yuan trading in Hong Kong and, to a much smaller degree, New York. It is also encouraging companies to issue yuan-denominated - or "dim sum" - bonds.
The yuan's value is still determined by the Chinese government, raising tensions with Beijing's trading partners, including the U.S. Even so, Qu believes China's recent moves will raise the yuan to be among the top three currencies in global trade. "Within five years' time," he said, "one third of China's cross border trade will be settled in yuan rather than dollars."
Chinese President Hu Jintao called the dollar a "product of the past" ahead of his meeting with U.S. President Barack Obama. Will the yuan be the currency of the future?
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