Tuesday, April 17, 2012

China Promoting Internationalization of RMB Backed By Gold

Image by Darren Wamboldt/Bergman Group 
China has been building the foundations for the RMB’s use internationally over the last few years. The latest milestone has the China Development Bank planning to offer loans in renminbi to the other BRIC countries, Brazil, Russia, India – as well as South Africa.  Having an international currency promotes trade, cutting the US dollar out of the equation. The ultimate goal may be to pitch the renminbi as a reserve currency to compete with – or displace – the US dollar.  To really sell the RMB as an international currency, it helps if it is backed with a significant amount of gold. China would never openly admit this, but a snippet from an embassy in China, via a wikileaks story, as good as confirmed it last month:

“The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro.

Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.“

Read Full Article : How China is Driving Gold Price

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