Sun Lijian, a Professor of Finance and Vice Dean of the School of Economics at Fudan University, wrote an article in Shanghai Securities News recommending that China should expand Shanghai’s offshore settlement business to control the dollar value of its holdings of U.S. debt. “When they (the United States) threatened to default, we realized how critical it is for China to … internationalize the renminbi.” Sun recommended that China leverage Shanghai as an international financial center and proactively expand the Asian dollar offshore settlement business. This would enable China to get around the bottleneck from the absence of a market mechanism for adjusting the exchange rate and the interest rate, the lack of international finance professionals, and the deficiencies in risk management. That, wrote Sun, would allow China to protect, to the maximum extent, the dollar value of its holdings of U.S. debt, and buy time for China to internationalize the renminbi.
Source: Shanghai Securities News reprinted by Qiushi, August 1, 2011