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Repeats Story Initially Transmitted at 09:52 GMT Aug 10/05:52 EST Aug 10
     BEIJING (MNI) - China should decidedly and gradually reduce its reliance on
the dollar after the U.S. escalated trade frictions to a financial war by
labeling the Asian country a currency manipulator, a former policy advisor and
chairman of China Finance 40 Forum Executive Council said on Saturday during
China Finance 40 Yichun Forum.
     Chen Yuan, who also served as a vice chairman of the Chinese People's
Political Consultative Conference and head of the China Development Bank, spoke
at Yichun, northeastern Heilongjiang province. Here are Chen's major points:
     -China should increase the use of other currencies in the process of
development to reduce reliance on the dollar, but this should be done gradually
given the U.S. dominates the international payment, investment and reserves at
present. China should change the view that U.S. treasuries are wealth but start
to set steps to replace them, again gradually and over the long-term, with other
forms of wealth.
     -China should make the yuan more flexible and keep necessary management of
capital flow in case the U.S. expands financial sanctions. China should observe
international rules and garner more global support. The yuan's
internationalization should be accelerated and its use in commodities needs to
be further increased to channelize the process, including the use in oil, iron
ore, agricultural produces.
     -The labeling against China was a signal that bilateral trade tensions have
escalated to a war in finance. China should be well aware that the yuan is still
comparatively weak globally and prepare for a prolonged confrontation.
     -China cannot decouple from the U.S. in finance given it holds about USD1
trillion treasures, which also makes U.S. dependent on China. But China should
prepare for the worst scenario that the U.S. may employ more tools and methods
of containment.
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

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