Australia is the fifth-biggest source of goods bound for China, responsible for almost 5 percent of China’s total imports in 2011-12, according to Australia’s department of trade.
The move – China starting direct currency trading with Australia – will allow the pricing and sale of goods priced in renminbi rather than US or Australian dollars, and while it is not going to have a major impact in the near term, it is evidence of China’s intent to push pricing of commodities in their own currency.
As if to underline how seriously financial centers around the world are taking the rise of the redback (as the renminbi is sometimes known), countries are vying for the right to trade, hedge and transact renminbi currency dealing.
Singapore and Taipei are said the be keen to build on their position following earlier currency swap deals, and France sent a delegation to Hong Kong last month keen to persuade China that Paris could become a trading hub for the currency in Europe. Not to be outdone, the UK’s Treasury hosted a forum on trading the renminbi and is said to currently be the front-runner to join Hong Kong as a trading hub for the currency.
This would potentially create a lot of jobs in the financial sector as the currency approaches full convertibility in gradual steps over the next few years.
Liberalizing China’s currency system would remove the costs of Chinese companies having transact via dollar or euros and make Chinese companies more efficient in international trade. The process of full convertibility could take five years, but while the timeframe is unclear, the direction is unmistakable.
China has aspirations for Shanghai to rank alongside New York and London as a global financial center dealing in its own currency, and that won’t happen without the currency becoming fully convertible.