Australia and China are set to discuss the possibility of a direct conversion of the Australian dollar with the Chinese yuan during a round of high-profile meetings in Beijing this month.
Wayne Swan, Australia's treasurer, said that the country was a keen supporter of the idea of China liberalising its currency and making it more agreeable – i.e. convertible – globally.
The benefit to both countries is mainly financial, as it will lessen the excessive cost of trade between Australia and China.
At present, the system is somewhat archaic. For example, if an Australian company wants to trade with its Chinese counterpart, it must convert its currency into US dollars first.
The reason for this is that there are simply no mechanisms in place that allow Chinese companies the freedom to trade directly in Australian dollars. This comes from China's longstanding isolationist policies, which are slowly coming under reform.
Only the US and Japan have currencies that are directly converted into Chinese yuan, which is reflective of the fact that they have the biggest economies in the world.
British expats moving to Australia will be interested to learn that China is Australia's biggest trade partner; a strategic move considering China's continuing economic growth.
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