China Controlling Global Economy

China wants its currency, the yuan, to replace the U.S. dollar as the world's global currency. That would give it more control over its economy.

As China's economic might grows, it's taking steps to make that happen. A slim majority of institutional investors see it as inevitable, but don't say when.1 Could we see a switch from a greenback- to a redback-dominated world? If so, how and when would that happen? What would be the consequences?

Before the yuan can become a global currency, it must first be successful as a reserve currency. That would give China the following five benefits:

1. The yuan would be used to price more international contracts. China exports a lot of commodities that are traditionally priced in U.S. dollars. If they were priced in yuan, China would not have to worry so much about the dollar's value.
2. All central banks would have to hold yuan as part of their foreign exchange reserves. The yuan would be in higher demand. That would lower interest rates for bonds denominated in yuan.
3. Chinese exporters would have lower borrowing costs.
4. China would have more economic clout in relation to the United States.
5. It would support President Jinping's economic reforms.

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