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Marsh on Monday
Jan. 24, 2011, 12:01 a.m. EST
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By David Marsh, MarketWatch
HONG KONG (MarketWatch) "â? "The current international currency system,"? President Hu Jintao said portentously last week, "is the product of the past."? The statement "â? coming in a bland set of written answers to Wall Street Journal and Washington Post questions at the outset of Hu's U.S. trip "â? made headlines around the world. However, as always, it was difficult to discern exactly what Hu was driving at.
On the final day of his four-day visit to the U.S., Chinese President Hu Jintao spoke to students at a Chicago public high school with China ties.
Many things we don't actually wish to get rid of "â? coal, soap, sunshine, newspaper headlines and bottles of beer "â? are "products of the past."? China is stoking the impression that it wishes to modify the present currency arrangements under which the dollar is still by far the dominant international money, even though the U.S. accounts for a shrinking share of world GDP and the dollar makes up a declining percentage of trade and investment. But Beijing remains remarkably vague about what it proposes to put in its place.
Inscrutable comments are all very well. Grist to the mill of inventive analysts whose conjecturing can never be verified or disproved. But isn't it time that the Chinese stepped up to the plate and issued a slightly more comprehensive set of ideas of what they actually want from reform of the international monetary system?
In the past couple of years, China has enacted a series of steps for enhancing the yuan's global role. It is allowing companies and official bodies greater leeway in holding the currency both onshore and offshore and using it for borrowing and trade settlement. In the latest shift, it is allowing domestic companies to move yuan offshore for investment purposes.
The move comes as the People's Bank of China is allowing a controlled upward move of the yuan in response to repeated U.S. concerns that the currency is undervalued.
This, for China, is the Achilles' heel: If the world monetary system is outdated, then shouldn't the People's Bank be lowering the volume of reserves held in dollars?
The chip giant boosts its share buyback to rekindle interest in its shares, but is the move just a confirmation that it is an older, slower growing tech firm?
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