Much has been made, particularly in Hong Kong, of China’s decision last week to allow settlement of certain cross-border trade in yuan. For sure, this is a step forward towards full convertibility which would increase the role of the nation’s currency. However, the notion that it will significantly reduce the role of the US dollar in trade transactions except in the very long term is dubious. Indeed, China has good reason not to want to see its currency in demand outside its borders, flattering though that might be.

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