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OpEdNews Op Eds    H2'ed 8/14/15

What the Latest Currency "War" is All About

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Thus the inside word in Beijing about "powerful voices inside the government" pushing for the Bank of China towards an overall 10 percent devaluation of the yuan. Now that would certainly boost exports.

This being China, where planning ahead is a matter of years, not a day-to-day frenzy as in Goddess of the Market territory, the whole game is about turning the yuan into an official global reserve currency.

A team of IMF experts has recently been to Shanghai, talking to officials at the Chinese central bank and China Foreign Exchange Trading System, which oversees currency trading in China, to establish whether the yuan can be part of the special drawing rights (SDR) basket.

Not surprisingly, the IMF itself praised the recent devaluation; "China can, and should, aim to achieve an effectively floating exchange rate system within two to three years."

And the IMF also admits that, "a more market-determined exchange rate would facilitate SDR operations in case the Renminbi were included in the currency basket going forward."

So this is what it's all about; Chinese adjustments with an eye to get the yuan ready to qualify for reserve currency status. The IMF's final decision is expected to be made by the end of 2015 or by the fall of 2016.

An internationalized yuan established as a global reserve currency implies a "market-determined" exchange rate policy. That's what the Bank of China is ultimately aiming at. The rest is a tempest in a (US dollar) teacup.

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Pepe Escobar is an independent geopolitical analyst. He writes for RT, Sputnik and TomDispatch, and is a frequent contributor to websites and radio and TV shows ranging from the US to East Asia. He is the former roving correspondent for Asia (more...)
 

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