October 5, 2016
IIP, International Investment Partners, Sergey Nosenko, Sergii Nosenko

The assignment of the yuan the reserve currency will promote trade with China, — Sergii Nosenko

Sergii Nosenko, senior managing Director of investment company International Investment Partners believes that the inclusion of the Chinese currency to a basket of reserve international currencies is a positive signal for the Ukrainian business and a stimulus for more active development of trade relations with China. This opinion was expressed to UKRINFORM, commenting on the inclusion of the Chinese yuan in the list of the world’s reserve currency on 1 October 2016.

Reserve (sometimes “hard”) currency is a universally accepted currency, which is used to create national monetary reserves Central banks of the States .

The list of such currencies (the“basket”) was established in 1969 in order to determine the rate of non-cash payment unit — special drawing rights (SDR). At first, it consisted of 16 currencies, but in 1981 it amount was reduced to five: the U.S. dollar, German mark, French franc, British pound and Japanese yen. In 2000, mark and franc are “blended” in EUR. Now it also includes the yuan, with a total share of about 11%.

“As”reserve” status of the yuan gives the possibility of the Central banks of the countries to form the part of their national reserves, respectively, international trade and payments between domestic and Chinese partners directly in the yuan becomes legitimate from the point of view of international recognition of the reserves and the advantageous terms of business. Up to this time the settlements were mainly through the us dollar and this somehow complicated the process. Now Ukrainian companies will be theoretically able to freely buy yuan in the interbank market for payment on contracts and to transfer to the accounts of Chinese partners. But the national Bank should develop appropriate mechanisms and regulations for that,” said Sergii Nosenko.

In his opinion, it is a good time now to increase international trade with China. The Russian market is actually lost, the free trade agreement with the European Union has not yet gained momentum. But the Chinese market with its 1.5 billion consumers – is extremely interesting for Ukrainian producers. “Therefore, I predict the intensification of business contacts with China and advise local entrepreneurs to take a place in this promising market in advance “, — said the expert.

Source: a Review of Sergii Nosenko edition UKRINFORM Yuan now as the dollar