This article highlights the growing move internationally away from the dollar dominance in finance.
But it does also illustrate the 'closed capital account" which restricts the exchange of domestic and foreign currency even today in China.
No country should be allowed full WTO status with a managed and closed currency. There is no way to conduct 'fair trade' in such a regime. And certainly the actions by both Clinton and Bush to advance China as a trading partner while pegging the dollar at a steep devaluation remains a scandal of major proportion.
What would the world say if the US decided to move to a two tier currency system, devaluing the iternational dollar by 40% and then pegging it to a basket of currencies including the Euro, AUS$, Pound and Yen?
Caijing
Shares at Shanghai's International Board to be Denominated in Renminbi
By Fan Junli
09-18 19:59
(Caijing) Shares on Shanghai's too-be-launched international board will be denominated in renminbi rather than U.S. dollars, sources close to regulators told Caijing.
But critics say the decision could doom the board to the same fate of Japan's yen-deonomiated international board, which closed in 2004.
China has been preparing for months to launch an international board on the Shanghai Stock Exchange. Fan Xinghai, director-general of Shanghai' Financial Services Office, said September 14 that one or two foreign companies will be listed on the board in early 2010.
One of the key difficulties in preparing the board has been the question of whether the shares listed there should be denominated in renminbi or U.S. dollar, a source said.
U.S. dollar denominated listings would pose several problems. Overseas' companies' listings would be subject to the approval of more than one government department if their shares were denominated in U.S. dollars. Also, China's closed capital account, which restricts the exchange of local and foreign currency, would pose an obstacle to U.S. dollar listings, the source said.
"Now a consensus has been reached that it is not necessary to denominate foreign companies' shares listed on the domestic market in U.S. dollars," the source said.
His comments were confirmed by a several other sources close to regulators.
Critics argue that denominating shares in renminbi will make it difficult for international investors to trade on the international board.
"We may risk repeating the failure of Japan's international board," one securities industry source said.
Japan's international board, where shares were denominated in yen, had 131 listed overseas companies in 1991. But Japanese investors' enthusiasm towards shares on the international board withered and foreign companies began to delist their shares. Only 32 companies remained listed on Tokyo's international board by 2003 and the board eventually closed in 2004.
Nevertheless, supporters of the renminbi denomination arrangement for Shanghai's international board said the failure of Tokyo's international board could not be attributed to yen denomination. They claim it was caused by the slump in the Japanese economy, the yen's appreciation and the high cost of trading cost on the board.
