Gold hits a record high on rumor of the dollar replacement deal.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.
Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.
"When the crisis is over, we'll go back to a policy of appreciation of the yuan," Chinese authorities said, according to the French minister.
French Finance Minister Christine Lagarde expressed optimism after weekend meetings that China will play its part in rebalancing global growth.
“This is the first time I’ve heard the Chinese” expressly indicate their growth forecasts and plans for domestic demand, she said yesterday. It was “very precise language” that, if followed, will help “address global imbalances” and “have consequences on exchange rates.”
According to Robert Zoellick, World Bank President and former Goldman Sachs head and U.S. Secretary of State, you shouldn’t take the U.S. dollar’s reserve currency status for granted.
China now has four of the world's ten largest banks.
According to Reuters, as of July this year, Industrial & Commercial Bank of China (ICBC) is the world’s biggest with a market capitalisation of US$254.8 billion (Dh935.75bn). It is followed by China Construction Bank (CCB) with $174.5bn and Bank of China (BOC) with $154.8bn. Citigroup, which used to be the biggest bank in the world, is no longer in the top 10.
China will expand 9 percent in 2010, more than the 8.5 percent estimated in July, the Washington-based IMF said today in Istanbul, where it’s holding annual meetings. India will grow 6.4 percent, less than the 6.5 percent predicted previously. Japan’s growth outlook stayed at 1.7 percent.
Asia is leading the world’s emergence from its deepest recession since the 1930s after policy makers slashed interest rates to unprecedented lows and governments announced more than $950 billion of stimulus measures. The IMF predicts gross domestic product in developing Asia will expand at more than twice the pace of advanced economies next year.
“The global economy appears to be expanding again, pulled by the strong performance of Asian economies and stabilization or modest recovery elsewhere,” the IMF said. “Domestic demand appears relatively robust, particularly in China and India, helped by strong macroeconomic policy support.”