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Najib calls for expanded yuan role Malaysian PM tells world to wake to age of Beijing's economic dominance

By Thursday June 4th, 2009 No Comments

Malaysia’s prime minister said China and his country were looking into the possibility of expanding the yuan’s role in the region, amid global calls to reduce the US dollar’s dominance.

Najib Razak also called for more recognition of China’s rising clout, saying countries should accept and adapt to the reality of its ascent to global power status.

“We can examine whether we can use local currency to facilitate financing trade between our two countries because of the volatility of US currency,” Mr Najib told the South China Morning Post in Beijing after talks with Premier Wen Jiabao .

Mr Najib was on a four-day visit to China timed to coincide with the 35th anniversary of diplomatic ties established by his father.

Mr Najib said the dollar’s exchange rate “was moving in ways that are hard for us to comprehend”.

“More importantly, fundamentally what worries us is that the

“That is what is happening. The Treasury in the United States is printing more and more notes,” he said, when asked whether he supported the idea of making the yuan an international currency. “We are looking into the possibility of financing trade in local countries with local currency systems.”

China has been promoting the idea of replacing the dollar as the global currency, suggesting that because of the recession, a basket of currencies less linked to the fate of one economy would help stabilise the world economy.

Before the Group of 20 summit in London in April, People’s Bank of China governor Zhou Xiaochuan dropped a bomb by proposing a new global currency to reduce reliance on the dollar.

The recession has also encouraged Chinese officials to speed up a push for wider acceptance of the yuan amid growing interest – in countries not only in the region, but also in Africa and Latin America – in adopting the yuan and phasing out the dollar.

The feeling reflects China’s growing economic clout and worries about the US government’s deficit spending.

Since late last year, Beijing has aggressively promoted the yuan’s role in international business.

In December, the State Council decided to use yuan in Hong Kong and Macau trade settlements with a dozen mainland cities. The mainland is also expanding yuan trade with some Asian and African countries, and has signed currency-swap deals with several states.

Mr Najib said the world needed to adapt to the reality of China’s continuing rise.

“I think it’s inevitable. It is not something that you can wish wouldn’t happen,” he said.

“It has happened and will continue to happen. There is a shift in global power, but China has strength in its economic position; in fact, it’s the only large economy that is great. It has a lot of surplus, savings and therefore capital. It’s a huge domestic market, and it’s becoming more technologically savvy.”

However, he said the US was still a military superpower, and even though China’s armed forces were becoming increasingly powerful, it spent only about 10 per cent of what America spends on its army, navy and air force.

“China is no match militarily with the US. But the fact that China’s clout is ever increasing is something that one has to accept; it’s a reality,” Mr Najib said.

“You have to adapt, you have to accept and act accordingly. I don’t think you can say you don’t wish China to become one. China is already a giant.”

Malaysia and Vietnam agreed on May 6 to lodge an understanding reached on their continental shelf limits in the South China Sea with the United Nations under the UN Convention on the Law of the Sea. China opposed the move. Beijing insists that territorial disputes should be resolved through dialogue between the countries concerned instead of via the world body.

Mr Najib said Malaysia understood the complexity of the South China Sea issue and was ready to follow the guidance of international law and resolve the issue through friendly consultation. “The UN convention is one thing, but we also have a good relationship with China, and we will discuss with China the way forward,” he said.

“It is a very complex issue, and we have to handle it with care. One part is, of course, following international law with respect to some of the positions which are based on historical claims.”

Describing his visit, which ends today, as a journey of friendship that his father began 35 years ago in establishing relations with Communist China, Mr Najib said history meant a lot to him. He became prime minister just two months ago, replacing Abdullah Badawi, who resigned to take the blame for the United Malays National Organisation’s worst electoral performance.

Mr Najib’s late father – Tun Abdul Razak, Malaysia’s second prime minister – visited China in 1974, signing a joint communiqué with late premier Zhou Enlai , making Malaysia the first member of the Association of Southeast Asian Nations to normalise ties with the communist state.

“I came here for a couple of reasons, and I wanted to underline that it meant a lot to me,” Mr Najib said.

He said he told Mr Wen that he had come to China not just to follow in the footsteps of his late father, but to take the relationship even further.

“Because China is a country that has moved so fast forward, I need to do much more to bring the relationship to an even greater height,” Mr Najib said.

During his visit, the leaders signed a series of framework agreements meant to facilitate trade and investment, including the China-Malaysia joint action plan on strategic co-operation.

“This is more of a general framework, kind of a strategic framework for us to operate under,” Mr Najib said. The initiative showed the desire of both governments to deepen the relationship on all fronts, he added.

Source : South China Morning Post

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