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China's Pres. Hu calls dollar's preeminence 'thing of the past'

Paula Duffy's picture

President of China Hu Jintao has expressed hope that the preeminence of the U.S. dollar in international currency transactions, will come to an end in favor of the yuan.

"The current international currency system is the product of the past," Hu noted in answers to questions submitted to his foreign ministry office by The Wall Street Journal and the Washington Post.

President Hu's most pointed comments dealt with the future of the dollar and currency exchange rates. It comes on the heels of last week's news about the loosening restrictions on buying China's currency, the yuan.

Trading of the yuan was opened in the U.S. at three Bank of China locations in Los Angeles and New York. Those interested to do so must open a yuan account at one of those branches to begin trading. That news came six months after the first international yuan trading that opened in Hong Kong in July 2010. That story, here.

One of the sorest points between the U.S. and China of late is the Federal Reserve's anti-inflation policy for the dollar and its refusal to raise interest rates. China's view is that while there is virtually no inflation in the U.S., there is plenty in rest of the world and the value of the dollar has decreased as a result of it all. That would imperil, and potentially devalued the almost $3 trillion stake in our currency held by the Chinese.

The U.S. stance on the subject is radically different as one might imagine. Instead of it being the fault of the dollar, it is a product of the continued undervaluation of the yuan that has caused the problems say U.S. government officials. President Hu will spend time with President Barack Obama this week discussing that thorny subject and more in the continued power struggle for financial preeminence in the world.

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