Chinese currency renminbi is unlikely to supplant the US dollar as the world’s reserve currency in the near term, former US Treasury Secretary Lawrence Summers said today.
He said that renminbi would continue to internationalise, but would probably not supplant the American dollar as the world’s reserve currency, except possibly “in the very long term“.
He was speaking at the World Economic Forum (WEF) here.
“The centrality of the dollar is unlikely to change in a major way... just as there is a basic inertia in languages of communication, there’s a basic inertia in mediums of exchange,” Summers, who is also the Charles W Eliot University Professor at Harvard University, said.
Tensions remain between the US and China over the Asian economic major’s approach towards renminbi whose low is kept low.
Many of the American lawmakers and businessmen have expressed concerns over China keeping its exchange rates low, which is seen as a way to reap benefits from bilateral trades.
According to Summers, the reality is that China holds some trillions of dollars of liquid financial assets worldwide, on which it is earning an extremely low rate of return. At the same time, there are important shortages of investments in key sectors of the world, he added.
Meanwhile, former British Prime Minister Gordon Brown said that the rise of China is taking place in an interconnected world. Brown is currently the UN Special Envoy for Global Education.