Despite a slowdown in Yuan internationalization, 60 countries now hold the RMB as a reserve currency
Over the past four to six months, expansion of the Yuan in trade settlement has stalled a bit as countries have fallen back to holding dollar in light of declining economic conditions.¬† However with the acceptance of the RMB into the IMF’s SDR basket of currencies, 60 nations, including the ECB, now hold Yuan as a reserve in their central banks.
More than 60 countries and regions have adopted the Chinese renminbi (RMB), or yuan, as a new reserve currency, according to the latest report on renminbi internationalization by the People’s Bank of China.
Since last October, the International Monetary Fund (IMF) has included China’s currency in its Special Drawing Rights (SDR) basket as an international reserve currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound.
This inclusion has further promoted the international use of RMB. The European Central Bank invested 500 million euros of its reserves in renminbi-denominated assets during the first half of this year.
The yuan’s cross-border financial transactions will continue to grow, as settlements using the currency reached 9.85 trillion yuan ($1.49 trillion) to conduct cross-border trade settlements by the end of 2016.
The report also said about 240,000 onshore companies were using the yuan to conduct cross-border trade settlements by the end of 2016. –¬†EN.People.CN
Nations are slowly transitioning from the dollar into the Yuan currency as more and more oil producers begin to allow the RMB for use in trade settlement.¬† And this should only increase in the coming few years, especially as the Silk Road continues to grow across Eurasia, and the Chinese central bank prepares for a new digital currency.
The U.S. has held the reins over a singular reserve currency now for more than 70 years, but the environment that required such a system is no longer necessary since the majority of nations are fully recovered from the situations that made it necessary for a Bretton Woods agreement.¬† And with the transitions currently taking place for more bi-lateral trade versus having to use the dollar as a medium of exchange between currencies, acceptance and use of the Chinese Yuan will accelerate in the future since they are the world’s largest banking and industrial economy on the planet.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.