Renminbi must be convertible to be global currency: RBI

China's Renminbi should be freely convertible and its rate be market determined if it aspires to become world's reserve currency, replacing the US dollar, Reserve Bank Governor D Subbarao said today.

He said that to be a global reserve currency it should be "freely convertible both of current and capital account ... its exchange rate must be determined by market forces of supply and demand."
Subbarao said this during a discussion here on 'Will the Renminbi eclipse the dollar?'
The aspiring global reserve currency should account for significant portion of global trade, he said.
"Its (Chinese) financial markets must be open, deep and robust...and the policies of the country must inspire trust and confidence," Subbarao said while giving details of qualities desirable in any currency that wishes to replace US dollar.
Moreover, the RBI chief further said that the issuing country should "accept the exceptional responsibility of maintaining sufficient liquidity in the country".
Pointing out that India-China comparison has become a national obsession, Subbarao said, "for us in India, China means many things-- an object of envy, a challenge and then inspiration."
Recalling the China's rapid economic progress, Subbarao said the country has demonstrated what is possible to do.
"To that extent China is an inspiration. The task for us in India is to match up to that record, or even surpass it, but by doing it the Indian way," he said.