The currency swap between these two countries demonstrates China intends on building a business friendly relationship with Thailand. Many analysts have found this move by the Chinese government to be unusual since Thailand has had politically and economically rough year. But despite Thailand recent political unrest and its flood that slowed down its economy last summer, China investment has tripled from 2010 to 2011. China is now the second largest investor in Thailand. The currency swap will make the Yuan the go to currency, instead of the dollar, in trade between the two countries.
The Thai government positive attitude towards foreign investment and its actions to promote a free market has attracted heavy Chinese investment this year. Dr. Robert Vos, the Director of Development Policy and Analysis Division of the United Nations, told Asia Outbound that Thailand regulatory protections have kept Chinese investors calm despite the recent political unrest. he regulatory environment in Thailand has remained stable and predictable--a factor that is crucial for investors. As such, the occasional incidents of unrest in recent years seem to have had only a limited impact on the operations of international investors in Thailand. /p>
Twenty-eleven was a big year for China expanding the use of the Yuan overseas, with currency swap deals signed with many other nations including Japan, South Korea, Hong Kong, Malaysia and Kazakhstan.
During the same week that China signed a currency deal with Thailand, China also agreed with the Pakistan government to swap 10 billion Yuan ($1.6) for 140 billion Pakistani rupees. According to Chinese and Pakistani authorities, the currency swap was established to promote investments and trade between the two states.
Despite China efforts this year to establish various currency swaps, on January 7th, 2012, the President of the World Bank, recommended that China to allow the Yuan to float, and to create more transparent and accountable institutions. he Chinese ... recognize that this reform agenda, including a stronger and more flexible financial sector would move hand in hand with the internationalization of the RMB. /p>
As these currency deals become more popular with China, and as the European and U.S. economy appear to have fallen from worldwide economic leadership, the possibility of the Yuan becoming a world reserve currency to challenge the dollar is becoming more of a reality every passing month.
