http://www.latimes.com/business/la-fi-yuan3-2009apr03,0,865582.story The only part I did not understand is how come Romania is the only country where Yuan is freely traded but nowhere else it can be done.. Why Romania?
Its small enough to never get on the radar. Until they eliminate the rest of the world's manufacturing capacity and unload dollar reserves, I think China will try to keep the yuan very cheap.
China doesn't offer any Yuan denominated government debt. How is it going to become a reserve currency when nobody can invest their reserves in their debt? At some point they will offer Yuan gov. bonds to foreigners, but even then, shifting international reserve assets may take decades.
I would say that the only currency that could replace the USD as a reserve currency would be the Euro.
The dollars days (as the reserve currency of the world) are numbered but not in the short term. The problem is that no other currency, including the yuan, has the liquidity necessary for global trading and finance. Even the dollar, apparently, hasn't always had the liquidoty that it should. But everyone on the globe knows that the US must inflate its way out of the 8 billion dollars worth of debt the govt has underwritten. Approximately 50% of the dollars are owned by foreigners and they are going to grow in influence, wealth, power and so on over the next decade. See Jim Jubak's latest article for some of the numbers...
Is it any worse holding a bond in a currency that depreciates in value faster than the bonds earn interest?
Its up to $11 trillion now. Time flies when you are spending like madmen. A billion, a trillion, its only 1000 times more.