China: yuan will replace dollar as reserve currency

Chinese president Hu Jintao has said that the global currency system, which is dominated by the US dollar, is a "product of the past" and that he hopes it will eventually be replaced by its own currency, the yuan.

China and the US are at loggerheads over what Washington sees as Beijing's manipulation of the yuan, which it claims is being kept undervalued in order to keep Chinese exports competitive.

Hu criticised recent quantitative easing by the US Federal Reserve which in turn has kept the value of the US dollar down. Hu said: "China has made an important contribution to the world economy in terms of total economic output and trade, and the yuan has played a role in the world economic development.

"But making the yuan an international currency will be a fairly long process."

However, for the yuan to become a global reserve currency, China would have to make large quantities of it available to investors and central banks around the world. This is an unattractive option for Beijing as it would lead to an increase in the value of the yuan – and make China's export-led economy less competitive.

Read a full report at BBC News. ·