Arvind Subramanian and Martin Kessler on the yuan, October 22

Arvind Subramanian and Martin Kessler on the yuan, October 22

"East Asia is now a renminbi bloc because the currencies of seven out of 10 countries in the region – including South Korea, Indonesia, Taiwan, Malaysia, Singapore and Thailand – track the renminbi more closely than the US dollar. For example, since the middle of 2010, the Korean won and the renminbi have appreciated by similar amounts against the dollar. Only three economies in the group – Hong Kong, Vietnam and Mongolia – still have currencies following the dollar more closely than the renminbi. This shift stems from China’s rise as a trader; its share of east Asian countries’ manufacturing trade has risen from 2 per cent in 1991 to about 22 per cent today."
"Not only is China, by some measures, the world’s largest economy in purchasing power parity terms, the world’s largest exporter and the world’s largest net creditor (for more than a decade), but the renminbi bloc has now displaced the dollar bloc in Asia. The symbolism and its historic significance cannot be understated because east Asia, despite physical distance, has always been part of the dollar backyard."