"The newspapers blowing up the implications of a 25-basis-point movement in interest rates is not the real big story in China this year, believe me," says Aaron Boesky, chief executive of Hong Kong-based Marco Polo Pure Asset Management.
So what is?
Boesky reckons there is a huge issue that headline writers are paying little attention to -- the settlement of China's debts with commercial paper and bonds denominated in renminbi, thus internationalising the currency via the path of trade.
Exporters in Guangxi and Yunnan are lobbying for an arrangement to settle cross-border trade in renminbi with members of the Association of Southeast Asian Nations (Asean), pursuant to the launch in January of a China-Asean free-trade agreement last month. Historically, the dollar has been used for settlements of their debts.
An experimental programme of cross-border RMB settlements was undertaken in 2009 in the cities of Dongguan, Guangzhou, Shanghai, Shenzhen and Zhuhai.
Since the renminbi is not fully convertible, China's trading partners are not free to dispose of their RMB in the same way as they could with euros or dollars. However, at this moment, with currencies competitively devaluing against each other and the renminbi a candidate for revaluation, counterparties might quite like the idea of holding the Chinese currency or RMB paper.
Last year China negotiated a RMB settlement with Brazil, whereby the dollar will be sidelined in favour of the renminbi.
Hence, Boesky predicts that we may arrive at a point where long-term Chinese paper is used routinely in order to settle energy and agricultural purchases. Issued volume of renminbi-denominated bonds in Hong Kong has grown from Rmb5 billion in 2007 to Rmb38 billion in 2009.
Of course, journalists may still get over-excited writing headlines about a tiny rise in Chinese interest rates. We shall see if Boesky's prediction comes true.
"Skipping the US dollar is a game-changer," says Boesky. "This is a big story that is already happening, period."