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On the front page of today’s Financial Times is an announcement that Singapore will have a Chinese bank appointed to clear renminbi trades directly in Singapore, which means that renminbi-based commerce in Singapore will no longer need to be routed through Hong Kong or banks in mainland China. The Financial Times calls this a, “new stage in the internationalization of the Chinese currency,” and they are right to say so (except they write “internationalisation” with an “s”).
We have seen the dollarization of an economy in Ecuador, we have seen de facto currency pluralism in Zimbabwe, and we have seen the preemptive Euroization of the European periphery with a Eurozone currency union that includes Portugal, Greece, Finland, and Ireland. There is no reason, with China set to eventually become the largest economy on the planet, that we should not see renminbization at some point, and sooner rather than later.
When we think of currency pluralism (if we think of it at all), we tend to think of situations like the early American republic, with small, regional scripts in competition with each other and not universally accepted. The new world of currency pluralism that is emerging is that of several worldwide reserve currencies, nearly universally recognized and accepted, and used in parallel. There is no reason this should not be the case.
There are already many economic institutions that employ the measure of a basket of currencies rather than referring to a single reserve currency. This is a good thing for the stability of the global economy. A basket of currencies reflects a global communitarian consensus on the value of money. So I say, let the renminbization of the Asian periphery begin, and let currency pluralism give the peoples of a world a free market in currencies, in which they are free to employ any currency that suits their needs for any transaction.
I can easy imagine an emergent nation-state deciding to save itself the trouble of producing a currency and simply stipulating that trades within its territory may be made in dollars, euros, renminbi, or what have you, in parallel, without favor or prejudice.