The Russian president, surrounded by Wall Street chiefs at an economic forum here, also outlined steps to boost foreign investment, including a cut in the capital-gains tax and overdue financial reforms, but investors said numerous barriers still obstruct Russian investment .
Russian President Dmitry Medvedev on Friday said he hosted talks with Chinese leaders about turning the yuan into a convertible reserve currency.
Mr. Medvedev said that a year ago at a meeting of the Shanghai Cooperation Union in the Urals Mountains city of Ekaterinburg, he discussed plans for boosting the international status of the Chinese currency, which is currently tightly controlled by the government.
Friday, he also named the Indian rupee and Russia's own ruble among the potential new reserve currencies. China and Russia have two of the three biggest war chests of international reserves.
"The future will show the correctness of our predictions, and I think the future of the world financial system is in the use of different reserve currencies and the creation of a multi-currency portfolio," Mr. Medvedev said.
"Three to five years ago, any discussion of this seemed like a fantasy that may never come true," he said. "Now we're discussing it in absolute seriousness with a number of countries, including our American partners, who are perhaps least interested in other currencies replacing the dollar."
The growing economic clout of Russia, China and India means it makes some sense for their currencies to form a greater share of global reserves, said Neil Mellor, currencies analyst at the Bank of New York Mellon in London, adding that it will be a "very, very long-term shift."
Interview With Medvedev
Russian President Dmitry Medvedev voiced concern about the fate of Europe's common currency and said the Gulf of Mexico oil spill could threaten the survival of BP. Asked whether Europe's debt turmoil could threaten the euro, Mr. Medvedev said, "I don't exaggerate the threat, but it can't be underestimated."
China will probably move cautiously toward making its currency convertible because doing so completely would allow unrestricted access to domestic securities. In recent years, Russia opened its ruble and bond markets, only to see the currency face a painful devaluation in late 2008 and early 2009 after commodity prices fell. The central bank still acts to control the ruble's volatility as Russia faces alternate bouts of speculative capital, attracted by relatively high interest rates and oil price gains, and sharp selloffs amid global risk aversion.
Besides boosting Russia's clout abroad, Mr. Medvedev said he would eliminate taxes on certain long-term direct investments in Russia by 2011 and clear the way by the end of the year for a central securities depository, which would allow large investors concerned about trading and holding stocks and bonds to invest locally in Moscow for the first time.
The lower level of parliament on Friday gave preliminary approval to legislation that would allow authorities for the first time to pursue insider trading.
"Russia needs a real investment boom," Mr. Medvedev said. His chief economic aide has said that in the absence of rising commodity prices, Russia requires foreign investment to boost annual economic growth above 5% annually, a level other major emerging-markets include Brazil, India and China are seeing this year.
Still, some investors are inured to the influence of friendly rhetoric repeated by the Kremlin, this week against the backdrop of the annual St. Petersburg International Economic Forum, attended this year by Citigroup Inc.'s Vikram Pandit, J.P. Morgan Chase & Co.'s James Dimon and Morgan Stanley's John Mack.
"Russia has been toying around with the idea of a central depository for about 20 years," said John T. Connor, portfolio manager of the Third Millennium Russia Fund. "They have a theoretical grasp of what they'd like to do, but the rubber hasn't hit the road."
Mr. Medvedev, widely seen as more investor-friendly than his Kremlin predecessor, Prime Minister Vladimir Putin, is probably seeking to "improve market infrastructure after its failings in 2008," said Mattias Westman, chief executive of Prosperity Capital, which manages Norway's oil investments in Russia. "The timing is uncertain, but they usually keep explicit promises."
In fact, the tax cuts Mr. Medvedev mentioned may not even be needed, said Renaissance Capital founder Peter Jennings, who expects to see renewed foreign investment in emerging markets this year "anyway."
Russia attracted only $5.8 billion in foreign direct investment in the first quarter of 2010, the slowest start to a year since 2006. Last year's $38.7 billion of foreign direct investment was only about half of that of 2008, according to central-bank data.
Yet the number of direct-investment projects climbed to 170 last year from 143 in 2008, according to Ernst & Young. Meanwhile, Russia-focused investment funds saw $1.9 billion of inflows--more than Brazil, India or China--in the first half of 2010, according to Emerging Portfolio Fund Research.
—Katie Martin in London and Ira Iosebashvili in St. Petersburg contributed to this article.
No comments:
Post a Comment