the snowball is growing, page-7

Hi timber

* As I understand things about 10% of currency trading now involves the Yuan.

* As far as convincing Western companies to settle in Yuan ... why would they baulk at that if the Yuan is freely convertible into other currencies, which is China's stated intention in the near future? Also, if the business transaction is with China surely it is cheaper to do the deal in Yuan rather than double handle a deal by adding an unnecessary extra transaction in $US?

* I do not see gold as being an indispensable ingredient for greater confidence in the Yuan but I don't think it will hurt either.

* As far as China's banks are concerned ... they play a central role in any business deal in China, a bit hard for Western companies to work without them. As China internationalizes its currency, Western banking will hold significant Yuan in any case [will they not?] so I can not see any force in your skepticism ... the Yuan will be the currency of choice for many deals done with China.

* And then there is the point about confidence in Western banks ... that confidence in them took a beating during the GFC and it is not at all clear they are out that mess yet. QE is alive and active. Tapering [in the US] has only reduced the purchasing of distressed assets. 60+ billion a month is an indication to me the US banks, at least, still require support. Eurozone banks are still in the poo ... are they not? Chinese banking scrubs up alright by comparison.

* The over-all point I am making is ... as China enters into agreements which provide for convertibility of the Yuan, more and more companies will be holding it on their books. It seems perfectly natural to me that transactions will take place denominated in Yuan which in previous years could only have been conducted using $US. Once this occurs Western banks will be pleased enough to get on board ... after all a fee is a fee.