BEIJING — Malaysia’s prime minister said China and his country are considering conducting their trade in Chinese yuan and Malaysian ringgit, joining a rising number of nations thinking of phasing out the dollar.
“We can consider whether we can use local currencies to facilitate trade financing between our two countries,” Malaysian Prime Minister Najib Abdul Razak told reporters at a briefing Wednesday after meeting with China’s premier, Wen Jiabao.
“What worries us is that the [U.S.] deficit is being financed by printing more money,” Mr. Najib said. “That is what is happening. The Treasury in the United States is printing more notes.”
China has been promoting the idea of replacing the dollar as the global currency, suggesting that a basket of currencies less linked to the fate of one economy would make more sense. It also has been talking about using the yuan for trade settlements, starting gradually in the region and then expanding farther abroad.
On Monday, U.S. Treasury Secretary Timothy Geithner urged China to move toward a more-flexible exchange rate for the yuan. If the yuan were to strengthen, that would increase China’s domestic buying power and reduce the country’s dependence on exports.
Chinese trading partner Brazil is also looking at reducing its exposure to the dollar by conducting its trade with China in yuan.
Despite countries’ growing interest in adopting the yuan — fostered by China’s growing economic clout and worries about the U.S. government’s deficit spending — many experts agree it would take a long time to liberalize China’s currency enough to be used as a global benchmark. Right now it’s difficult to buy and sell yuan outside China.
Malaysia’s Mr. Najib, speaking on the second day of a four-day visit to Beijing, timed to coincide with the 35th anniversary of diplomatic ties established by Mr. Najib’s father, said the two countries signed a series of framework agreements meant to facilitate trade and investment.
Mr. Najib, who is also finance minister, has been struggling to revive Malaysia’s export-dependent economy. In April, he unveiled measures to liberalize the country’s finance sector, allowing greater foreign investment and rolling back some of the decades-old preferential policies granted to elevate the country’s majority Muslim Malay population, which helped them compete with the ethnic Chinese.
Last week, the government sharply revised down its annual gross-domestic-product forecast to a contraction of between 4% and 5%, versus an earlier estimate of a 1% decline. Analysts now predict the nation’s fiscal deficit could rise to 8% of GDP, the highest level in a decade.
But Mr. Najib ruled out more stimulus spending. “We’ve introduced one of the biggest in the world — as a percentage of GDP it’s 9%. But there’s a limit to which we can introduce fiscal stimulus,” he said.
Source : The Wall Street Journal