Xi Jinping Proposes for Yuan to Be Global Reserve Currency
The call
made by the Chinese President Xi Jinping for the yuan (renminbi) to be
considered as one of the leading global reserve currencies is not only a
challenge towards the dominance that has been witnessed for long within the
international trade and finance by the US dollar but also signifies China’s
ambition in this regard.
Speaking at
a top financial forum in Beijing this week, Xi stressed the importance of
having a “fair”, multipolar currency system” which takes into account the
realities of modern global trade. He called on developing economies as well as
China’s major trading allies to use the yuan when making cross-border payments
so that it becomes more widely accepted and leads to decrease in dollar
dependence at international level.
Beijing’s
Push for De-Dollarization Gains Momentum
Xi’s
comments are part of an increasing trend towards de-dollarization, with many
countries looking for options other than the US dollar due to geopolitical
tensions, sanctions, and changing trade patterns. China has taken steps to
increase the use of the yuan by entering into bilateral trade agreements and
setting up currency swap lines with some of the largest economies like Russia,
Brazil, and Saudi Arabia.
Recent
figures from China’s central bank show that the yuan now makes up almost 5% of
global reserves, its highest ever level. The currency is now used more
frequently in international transactions through SWIFT, where it ranks fifth
globally behind the euro, dollar, pound and yen.
One
economist based in Beijing said, “China does not intend to replace the dollar
immediately; however, it is evident that there is a long-term plan aimed at
creating an alternative system through which developing countries can adopt the
yuan as their reserve currency.”
Strategic
Benefits and Global Impact
It is argued
by analysts that if the yuan becomes more dominant worldwide, then China will
have greater control over its finances vis-à-vis global markets especially
given that there are numerous cases today whereby Western sanctions or trade
barriers affect global finance.
A stronger
yuan presence could also reduce currency volatility in Asia and help stabilize
regional trade, particularly through the Belt and Road Initiative (BRI), where
Chinese loans and investments are already denominated in yuan.
Nonetheless,
experts warn that achieving reserve-currency status will depend on increased
financial openness, liberalized capital accounts, and market trust issues over
which Beijing has traditionally exercised strict control.
Global
Reactions and Future Outlook
Policy
makers around the world have noticed this. Some emerging economies see an
opportunity in reducing their dependency on the dollar by embracing the yuan as
an alternative while financial experts from the West caution that China may
alter monetary geopolitics with its plans.
As Xi pushes
for a “more balanced global currency order,” markets are watching closely.
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