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Jim Rogers: Chinese yuan to replace US dollar as global reserve currency

Jim Rogers Photo: Marketsanity.com

The increasingly stronger Chinese yuan is the only currency that will likely replace the US dollar as the global reserve currency, said Jim Rogers, co-founder of Quantum Fund.

The famed American investor, who appears to have long been bullish on the Chinese economy, made the remarks in a recent interview by the 21st Century Business Herald, in which he shed light on the reasons behind his optimism on China and expressed his expectations for Chinese economic reform after the 18th National Congress of the Communist Party of China that marked a key power transition in 2012.

In terms of China's severe economic slowdown and structural imbalances, Mr. Rogers said that as the global economy is showing signs of slowing, it is normal that China, together with many other countries, is taking measures to cool down its economy in an attempt to maintain sustainable and stable growth, adding that the United States became the greatest nation in the world in the 20th century even though it was plagued by 15 economic depressions.

Mr. Rogers believed that inflation and local government debts are potential risks for the health of the Chinese economy, but emphasized that they cannot decelerate the pace of China's growth.

Amid messages that Chinese banks may reduce new loans to property developers, which have fueled concerns over a real estate bubble, Mr. Rogers opined that a string of policies adopted by the Chinese government to curb the breakneck growth of the Chinese real estate market have to some extent created some good consequences and that the Chinese government's tightening policies will continue to further slump the housing prices.

A real estate bubble is not a good thing for everybody, but the sooner the bubble bursts, the better the Chinese economy will become, noted Mr. Rogers.

Mr. Rogers felt exhilarated about the signals released from a document published at the Third Plenary Session of the 18th CPC Central Committee last year, saying that he will inject his money into the sectors, which were mentioned in the document to gain the biggest financial support from the Chinese government in the next decade.

Despite the fact that the Chinese yuan is not freely convertible, Mr. Rogers still believed that the Chinese yuan will be stronger and stronger in the future and that it will become the only currency that can compete with the US dollar.

Mr. Rogers also urged the Chinese government to step up efforts to accelerate the liberalization of the yuan, arguing that China should allow the yuan as a fully and freely convertible currency as the country's foreign exchange reserve, the largest in the world, reached a record $3.83 trillion last year.

Regardless of the short-term fluctuations of the yuan-dollar exchange rate, Mr. Rogers said that he will continue to buy in the Chinese yuan and itches to sell short the US dollar, suggesting that investors should have more patience to hold the Chinese yuan amid concerns over the fluctuations.

(The article is translated by Ding Yi)
 


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