China and Russia have been trading directly in their own currencies and using them both interchangeably for settlement for over a year. As the The China Daily article reports,
China is allowing greater use of its currency for cross-border transactions to reduce reliance on the US dollar, after Premier Wen Jiabao said in March he was “worried” about holdings of assets denominated in the greenback.
Then on 26th December 2011 Bloomberg reported, Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
China is Japan’s largest trading partner. Japan will also start in 2012 buying Chinese debts. How much Dollar debt will either of them buy? They have both already been buying less.
And the reverse is also true. If China can transform the network of bilateral agreements which centre upon China and the Yuan, in to becoming accepted as a de facto reserve currency, then for those, like me, who wonder how China can possibly avoid a hard landing as its bad bank and property bubble deflates faster and faster, look no further.
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