Despite the sneers of most orthodox economists about the gold standard, it is still the case that all the central banks of the world — when they can afford it — are buying gold for their vaults. It is still a currency as far as they’re concerned.
China’s largest bank, ICBC, has just bought Barclays gold vaults in London. Barclays is fast giving up its bad old ways — including gold price manipulation — that brought it to disaster in 2008. The former, it would seem, is now setting up an extension to its Shanghai Gold Exchange whereby anybody with yuans (renminbis) can be paid in gold instead if desired.
Since its inception as an international trading currency about ten years ago, the Chinese yuan now mediates about 17% of world trade and is growing steadily. This compares with about 75% of world trade using American dollars — and steadily declining. Within about 20 years it will be 50:50 and then multinationals will be able to choose to trade in yuans or dollars.
When one currency will be able to be backed up with gold and thus be automatically self-balancing, and the value of the other subject to the whim of the American government, it’s a no-brainer to ask which will then become the preferable currency.