Actually, they’re already here:
It is the monetary equivalent of what Chairman Mao called “bombarding the headquarters”. China’s renminbi is rapidly displacing the US dollar as a trading currency not only in Asia and Europe but now also in the US home market.
The value of renminbi payments between the US and the rest of the world rose by 327 per cent in April this year from the same month a year ago (see chart) as more US corporations switched to using the Chinese currency to pay for imports from China, according to data from SWIFT, the international currency settlement firm.
Read that again. U.S. firms are now using a foreign currency to pay for imports.
First, US importers can slash the cost of imports from China by agreeing to trade in renminbi rather than US dollars, Lodge said. Second, a recent surge in the popularity of a host of renminbi-denominated financial market instruments are making it easier for US corporates both to hedge currency risk and to earn an investment return from the renminbi they hold.
This shift, Lodge says, is partly prompted by the recent depreciation of the renminbi, which has lost 3.2 per cent against the US dollar so far this year.
This shift, Lodge says, is partly prompted by the recent depreciation of the renminbi, which has lost 3.2 per cent against the US dollar so far this year. Previously, when renminbi appreciation was regarded as a one-way bet, Chinese exporters had a habit of transferring their foreign exchange risk to US importers by insisting on a lower dollar value.
Thus if the prevailing official exchange rate was around Rmb6 to the US dollar, US importers would often have to agree to contracts that valued the Chinese currency at Rmb5.8, making Chinese imports more expensive, Lodge said. But after switching to renminbi-denominated trade, US importers no longer have to pay an exchange rate premium to Chinese exporters.