China makes pitch for currency

The governor of China's central bank outlined a plan yesterday for a global financial system that relies on several major currencies, not just the dollar, as Beijing steps up its campaign to weaken the US dollar’s primacy.

- KEITH BRADSHER

Pan Gongsheng, the governor of the People’s Bank of China, did not mention the dollar by name but gave an extended critique of the potential dangers of international reliance on a single country’s currency.

In a coded reference to the United States, Mr Pan cited the dangers posed by fiscal and regulatory problems in the country issuing the world’s main currency.

These problems may “overflow to the world in the form of financial risks, and even evolve into an international financial crisis,” he said.

The Trump administration has spoken about weakening the dollar against other currencies to make US exports more attractive to buyers abroad. The dollar has weakened considerably this year, including an 11% decline against the euro.

A weaker dollar could help narrow the American trade deficit. But it also has the potential to increase the cost of US government borrowing amid ever-rising federal budget deficits.

China has kept the value of its currency, the renminbi, tightly linked to the dollar. That has meant it has fallen along with the dollar, making the price of China's exports even more competitive in Europe, a major trading partner, and elsewhere.

The dollar is by far the primary currency used in global trade, including when China is involved, followed by the euro. The renminbi has grown in use in recent years but remains a minor player in international trade.

FORMIDABLE OBSTACLES