China's yuan gains ground
February 29 2012 at 04:41pm
By Reuters

Bedroom sets, wooden dining tables and made-to-order sofas from China fill the showrooms of Royal Furniture in a dusty commercial district of Ajman, one of the United Arab Emirates.

The sight is common enough in the Arab Gulf, where booming economies are buying growing volumes of Chinese goods. But in one respect, Royal Furniture is a trend-setter: it pays for a small but significant portion of its products in China's yuan rather than the US dollar, the traditional currency for the region's trade.

For an area that has relied heavily on the dollar for decades - oil, the Gulf's main export, is priced in dollars, and most of its national currencies are pegged to the dollar - the shift is historic, pointing to a slow erosion of the US currency's dominance.

“The negotiations with suppliers are much easier, clearer and more transparent” when conducted in yuan, said Chandrasekaran Krishnamoorthy, director of Royal Furniture.

Commercial practices in the UAE have an impact on the entire Gulf because the UAE is the main trading hub and financial centre for the region. The UAE is China's top export market in the Arab world; China is the second biggest exporter to the UAE, after India.

Trade between China and the UAE expanded 39 percent from a year earlier to $32 billion in the first 11 months of 2011, with Chinese exports growing 28 percent to $24.3 billion and Chinese imports jumping 89 percent to $7.6 billion, China's customs data show. Most Chinese goods shipped to the UAE were re-exported to other countries in the Gulf, Africa and even Europe.

“One of the advantages of settling in renminbi is that they can access a broader customer base in China,” said Janet Ming, who was appointed head of Royal Bank of Scotland's new China desk in London this month.

The transaction time for settlements is shortened substantially and costs for importers of Chinese goods are reduced because suppliers in China no longer add the risk of exchange rate fluctuations as a margin to the price, she said.

Globally, the percentage of China's trade settled in yuan grew to roughly 7 percent in 2011 from under 1 percent in the June quarter of 2010.

HSBC predicts around $2 trillion, or more than half of China's global trade, will be settled in yuan by 2015.

“The interest for renminbi accounts is increasing because the renminbi is appreciating, and because of the financial crisis, the Gulf region is now looking East,” said Tian Jun, Bank of China's chief representative in Dubai and Bahrain.

Settling trade in yuan is an issue that many more companies in the Middle East will face, she said. “If you are seriously thinking of doing business in China, you definitely need to think about this.” - Reuters

Yet not in Iraq, nor during the Vietnam War, nor the Korean conflict, nor even during the Philippine Insurrection at the turn of the twentieth century were there similar examples of what once would have been called "native troops" turning on those training, paying for, and employing them. You would perhaps have to go back to the Sepoy Rebellion, a revolt by Indian troops against their British officers in 1857, for anything comparable.

“Given the direction that things were going, I think the administration’s policies played an important role in preventing something that looked like the Great Depression. No matter how bad things are now it wasn’t as bad as it could have been.”

Post 1947 Indian Nationalists have thought to refer to the events (1857 Sepoy Rebellion as India's First Nationalist Uprising. It is clear why they would like to brand this event as a nationalist uprising. It was unusual in that it did attract Muslims and Hindus to the cause, but the event was clearly confined to Northern India in general and Bengal in particular.

Now, thanks either to Taliban infiltration, rising anger, or some combination of the two, it’s clear that any American soldier who approaches a member of the Afghan security forces to "hand over" anything takes his life in his hands. No war can be fought under such circumstances for very long.

“We’re not going to let the events of the past week, which are regrettable and unfortunate and tragic, influence the long horizon view that we’re taking,” Defense Department spokesman George Little told reporters at the Pentagon.

“There is absolutely no reason to change course when we’re making the kind of progress we’re making,” Little said later.

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