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Against the background of the debt crisis in the Euro zone, the weak US Dollar and the gradual internationalisation of the Yuan, experts in the field of finance from China and Europe discussed the future of international currencies and the options for a better regulation of the international financial markets.

Prof. Andreas Dombret, member of the Executive Board of the Bundesbank (German central bank), explained the current situation of the international monetary system and analysed the options for the future financial- and monetary order.

Prof. Dr. Xu Mingqi, professor at the Shanghai Academy of Social Sciences (SASS), commented on the role of China in the international monetary system and the efforts of the People’s Republic to internationalize the RMB. He is convinced that China, due to its rapid economic growth, on a long term can develop from an industrial power into a financial power. Apart from its high foreign currency reserves, Chinese have enormous savings which amount to about 6 trillion RMB. China already possesses the fifth largest stock market in the world and the market for “futures” is also growing rapidly.

He outlined that China sees its currency reserves threatened because of the impairment of the US Dollar and pined its hopes on the Euro as an alternative investment form. Nevertheless because of the recent Euro crises the USD could be strengthened and considered a save investment again. Prof. Xu is convinced that until 2020 the RMB will be fully convertible without and from then on also could serve as global reserve currency. However, the RMB will not be able to challenge the US Dollar in its important functions. In the future he hopes for a stronger coordination of the leading currencies to prevent exchange rate fluctuations. Furthermore he is of the opinion that the utilization of special drawing rights (SDRs) of the IMF and the role of the IMF for controlling the international finance markets should be strengthened.

The following panel discussion with German members of parliament and finance experts gave insights into the efforts of German and European politics to solve the debt crisis in Europe. Claudia Winterstein, member of the FDP parliamentary group and of the budget committee of the German parliament, explained strategies to help Greece to handle the debt crisis. When Greece was accepted as a member of the Euro zone, deficits of the Greek national finances and the economic structure were known already. Even when the national budget deficits became more evident some years ago, European decision makers did not react in an adequate way. Having made the decision for the “restructuring” of Greece’s dept, now it is of major importance to continue to assist Greece in the consolidation of its debt. Therefore coordinated efforts of the euro zone will be necessary. An expulsin of Greece from the currency zone is no option in her opinion.

Wolfgang Tiefensee, former minister of transportation and member of the SPD parliamentary group, appealed to Chinese investors to have confidence in Europe and the Euro. He compared Greece with East-Germany, which was in a disastrous economic condition after the unification and which was rebuilt with the help of the “West-Germany”. In his opinion a similar solidarity of the EU towards Greek is necessary now. Therefore he advocated a “build-up south” programme for Greece and other South-European states.

Rainer Wunderlin, Managing Director of the Bank of New York Mellon, remarked that the debt difficulties of the USA are often overestimated. As taxes in the USA are extremely low in international comparison, already a slight raise could easily lift the burden of the national budget. He identified the high military spending for the interventions in Iraq and Afghanistan as the key problem of the American national budget. Indeed, he is convinced that this problem has already been identified and that during the next presidential term a turnaround in the field of military spending will take place – no matter whether a Democrat or a Republican government will be elected.

During the discussion various options to adjust the regulation in the Euro zone as a reaction to the European debt crisis were discussed. Mainly two possibilities were mentioned: Either to enlarge the competences of supranational organisations in the financial field or to leave them in responsibility of the nation-states, but to enhance the control- and sanction-mechanisms of the EU institutions. China could also contribute to the solution of the current problems through the acquisition of state bonds of those European countries, which have been sliding into crisis. Besides that the regulation of high-risk financial products was discussed as well.