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How China’s yuan can up its game as a reserve currency

24 0 2

Everyone wants to knock the US dollar off its throne as the world’s leading currency. Europe has tried and failed, with the euro’s hope for global forex glory badly dented by the European debt crisis. Beijing would love to see the yuan leapfrog into pole position but it is losing the hearts and minds campaign to win over markets and build confidence in the yuan as a credible dollar alternative. Beijing has its work cut out if it is going to steal the dollar’s crown before the 21st century is out.

Just because China’s yuan now officially ranks as a reserve asset currency with global central banks hardly means a jot. The yuan has come from a standing start in 2016, when it was first granted reserve asset status by the International Monetary Fund, but its progress to date has been less than stellar. By the end of the third quarter last year, foreign exchange reserves denominated in renminbi only accounted for a meagre 1.8 per cent of the world’s US$11.4 trillion outstanding reserves. That compares with 62 per cent held in US dollars and 21 per cent based in euros according to the IMF’s currency composition of official foreign exchange reserves report – not too far behind the Japanese yen’s 5 per cent ranking.

China still has a lot of catching up to do to win........

© South China Morning Post