The past year and a half has witnessed remarkable changes in the world's economic balance. Policy makers and business leaders are now talking about the post-recession and world economy.
Zhou Xiaochuan, governor of the People's Bank of China, says a commercial bank's interest rate should not be cut too low. He cited the ongoing financial crisis, saying low interest rates will discourage banks from lending to businesses. Banks may instead turn to more profitable investments, which he says will hamper the recovery of the overall economy.
Zhou Xiaochuan said, "When we make policies at the central bank, we have to make sure that the policies will push financial institutions to serve the real economy actively. Low or even zero percent interest rates, together with low savings rate, won't give banks incentives to provide funding to the real economy. Banks will keep the liquidity to themselves because the cost is very low. In this case, banks are not helping the economy at all."
Zhou said that on BusinessWeeks' Global CEO forum. On the forum, China's transition away from a dollar-denominated world is also a key topic.
Robert Mundell is the winner of 1999 Nobel Prize in economics and is considered the "Father of the Euro". When asked if China's renminbi, has a chance of becoming a global reserve currency after the financial crisis, he said it may take decades.
Professor Robert Mundell of Columbia University, said, "Usually there are only one or two big currencies in the world. Right now, the US economy is about 22 percent of the world economy. The Europe economy is about 18 percent. China is only 7 percent. So China is long way behind. Certainly China will exceed not only the Europe economy by 2030, but the US economy by 2050 if China's growth continues. So in about 40 years, China may have the most strong currency in the world."
Mundell says it's still premature to talk about the Chinese RMB becoming a major world currency. But some of China's neighbors are willing to use the RMB in cross trade settlements. Traders say they readily accept the RMB for many reasons including its recent peg to the US dollar, its strength, convertibility, and the low expectations of further depreciation against the dollar.
Editor: Liu Anqi | Source: CCTV.com