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Create new international and secure financial asset classes

Comments on Yang Yao “China’s growing pains, globalisation and adjustment”, 7/04/2010, http://www.eastasiaforum.org/2010/04/07/chinas-growing-pains-globalisation-and-adjustment/comment-page-1/#comment-109532

There is clearly a need for more international assets classes for investors including sovereign funds and central banks.

In that context, IMS SDR might be a good candidate. Alternatively, the World Bank could issue WB bonds. But for liquidity purposes, the IMF or the World Bank must be ready to act as a market maker too in case there is not enough liquidity.

Leaving that aside, why can't China be more innovative to set up an international bank to provide loans in foreign currencies at reasonably favourable rates to sovereign countries? In that way it can also have security and reasonable returns for its international reserves.

Alternatively, why doesn’t China work together with the IMF or the World Bank to create some monetary facilities to create some new international financial asset classes.

Once the issues of assets in foreign currencies and current account trade needs are separated, it is easier for China and indeed other countries too to move more freely on exchange rate issues.

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