investmentcontrarians.com / By Sasha Cekerevac for Investment Contrarians / Jan 31, 2013
While many people are aware that the Chinese economy is now the second-largest in the world, China’s currency, the yuan or renminbi, is also moving upward in the world rankings in terms of global transactions.
According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the world’s global payment system, the yuan has moved up from 20th in the rankings in January 2012 to 14th position in December 2012. The Chinese yuan is now above the Danish kroner in terms of global payments. (Source: “RMB Tracker: January 2013,” Society for Worldwide Interbank Financial Telecommunication web site, January 24, 2013.)
That is a significant move and an indication that the Chinese economy is becoming more integrated worldwide.
Why does this matter to the average American?
For a long time, America’s economy has been the global leader and the U.S. dollar has been the global reserve currency. Every other nation was seen as secondary to America’s dominance. This is now starting to shift.
As the U.S. national debt level continues to grow, the strength of the Chinese economy is enabling considerable efforts to be made at developing globally interconnected markets that can survive and thrive without the U.S. dollar.
While the Chinese economy is certainly not perfect, it doesn’t have to be. With the rising level of U.S. national debt, the Chinese economy just needs to be relatively better than the U.S. economy, though not in absolute terms.
The point is that the rise of the Chinese economy over the past decade and the looser restrictions that the Chinese government is placing on the yuan mean that global businesses and investors have an alternate choice to the U.S. dollar.