LUXEMBOURG Feb 26 China's yuan currency is
gaining importance in international trade and investment and
might ultimately challenge the U.S. dollar, European Central
Bank Executive Board member Yves Mersch said on Wednesday.
Speaking at a conference on the renminbi, or yuan, in
Luxembourg, Mersch urged the Chinese government to continue
reforming its economy and its financial sector because the yuan
was taking the first steps towards establishing itself as an
international investment currency.
"If it can do so successfully, it might one day become a
leading reserve currency," Mersch said in a text of a speech.
"Due to the size of China's economy and its importance in
global trade and, potentially, finance, the renminbi might
ultimately come to challenge the U.S. dollar," Mersch added.
Luxembourg is competing with other European financial
centres, including London, for a major role in the growing
market for offshore yuan.
Mersch said from a euro zone perspective, the yuan's growing
internationalisation also called for closer monitoring of risks
stemming from increased exposure to yuan-denominated assets and
liabilities in euro zone banks.
"The increasing presence of Chinese banks within the euro
area also brings its own challenges regarding banking
supervision, including the need for greater cooperation and
exchange of information between home and host authorities,"