The solid growth of baby brother
Updated: 2013-03-15 09:09
By Cecily Liu (China Daily)
David Bloom says the internationalization of the renminbi will help restore confidence and stability to global trade and financial markets. Cecily Liu / China Daily
The Renminbi has credentials to be a reserve currency alongside the dollar, says forex expert
The internationalization of the renminbi is benefiting global trade and bringing stability to financial markets, says David Bloom, global head of foreign exchange strategy at Europe's largest bank HSBC.
The 48-year-old banker sees this trend as something important amid the current global currency war, caused by economies such as Japan and Switzerland devaluing their currencies to drive up domestic growth and exports.
"A currency war is very destructive," Bloom says. "Luckily, China has adopted an increasingly 'hands-off' approach to create a more flexible exchange regime, and it has helped to create more peace in the world."
Brazilian Finance Minister Guido Mantega coined the term international currency war in 2010 to describe a spiral of competitive devaluations in industrialized countries, with the adverse effect of driving speculative flows into developing nations that typically have higher interest rates.
Such concerns heightened in recent weeks, after the Japanese yen declined about 20 percent as a result of the bold inflationary moves since Prime Minister Shinzo Abe assumed office in December. The moves attracted widespread criticism and concern and were the main topic of discussion at last month's Group of Seven and G20 summits.
Bloom says currency manipulation existed long before the financial crisis, but has attracted greater attention in recent years because of the poor global growth.