Can Chinese yuan be full-scale reserve currency?
    BRICS members face a dilemma

    ANALYTICS  05 June 2023 - 13:22

    Sadyar Aliyev

    Recently, talks have become more frequent that the countries that are members of the newly created organizations such as BRICS or SCO, as well as countries that have expressed their interest in participating in these organizations, will soon begin to look for an alternative to the dollar as an international alternative reserve currency.

    However, the BRICS members do not have a single opinion on group de-dollarization. All of them are interested in reducing their dependence on the US dollar, but not all of them want to be separated from the US-led global financial system.

    Most BRICS members still hold large amounts of US dollar assets in their reserves, but a reserve currency needs to be stable and safe, a store of value and a medium of exchange, and widely accepted and trusted.

    A reserve currency must be market-based, free-floating, and, most importantly, stable. That rules out cryptocurrencies that are prone to wild swings and live outside the regulatory system.

    A good reason for the shared dominance of the dollar and the euro, and, to a lesser extent, the Japanese yen and the British pound is that they represent the world’s major economic centres and operate within the rule of law.

    Meanwhile, other currencies do not yet qualify, as they are either too small (Switzerland), operate under totalitarian regimes (Russia and China), or allow for protectionism (India).

    Today the BRICS countries face a dilemma: while they would prefer to have an alternative to the US dollar as their dominant currency, a depreciation of the dollar would reduce the value of their large amounts of dollar-denominated assets. Thus, they need to balance their desire for greater international influence and financial autonomy with the material costs of weakening the dominant currency position of the US dollar.

    This balance is a critical issue not only for the BRICS but also has direct political implications for other countries and regional organizations that tend to have more independent monetary and economic policies.

    However, let's return to the favourite among the candidates for the role of an alternative world currency - the yuan. And here is the main question arises: does the Peoples’ Republic of China itself, which has the second largest economy in the world, want this?

    It turns out that he does not want to, and the main reason is that in China there is a fairly significant layer of super-rich people who have long had plans to move and transfer their assets in yuan abroad, or to be more precise, to the West. And the worst thing for the Chinese nouveau riche is the limits set by the Chinese government on the purchase of foreign currency.

    Thus, Chinese millionaires and billionaires can spend only a fraction of their wealth abroad. Now imagine that the yuan becomes a freely convertible international currency.

    The outflow of capital and people will occur at lightning speed and local assets in the form of real estate and local currency will depreciate in the blink of an eye. So, no country in the world will allow this to happen.

    The share of the yuan in the world economy is just over 2 per cent. This also does not add optimism to the supporters of the yuan in the same Russia, which is striving to get rid of suffocating Western economic sanctions.

    Thus, the prospects for the yuan to become a freely convertible international reserve currency are not great, because the dollar and the euro still feel more than confident, and the yuan itself, being relatively modest on international markets, does not strive for world domination, as mentioned above.


    Subscribe to our Telegram channel

Read also

New era in the pipeline: Transformative changes in Southern Caucasus A region in transformation

21 July 2024 - 17:16

Azerbaijan champions independence for French-colonized territories BIG leads the charge for decolonization

21 July 2024 - 10:41

US-Armenia Eagle Partner 2024 military drills & geopolitical implications Yerevan's strategic shift

21 July 2024 - 09:25

Karabakh Armenians feel uncomfortable in Armenia What are Azerbaijan's detractors silent about?

20 July 2024 - 15:55

What do international financial institutions predict for Azerbaijan's economy? Caliber.Az review

20 July 2024 - 15:06

China’s increasing footprint in Central Asia Stepping up military

19 July 2024 - 15:06
Latest news

    North Ossetia enforces restrictions as over 2,000 trucks wait to cross Russian-Georgian border

    22 July 2024 - 12:21

    Western Azerbaijan Community calls on Armenia to adhere to international law

    22 July 2024 - 12:09

    Harris campaign shatters fundraising records with $47 million surge after Biden’s withdrawal

    22 July 2024 - 11:57

    Armenian political stability at risk due to Biden dependency, says analyst

    22 July 2024 - 11:45

    US, UK launch airstrikes on Yemen's province

    22 July 2024 - 11:33

    Gas explosion rocks alcoholic beverages store in Russia’s Krasnodar

    22 July 2024 - 11:20

    Microsoft releases recovery tool to address CrowdStrike-induced IT crash

    22 July 2024 - 11:08

    NATO puts 500,000 military personnel on high alert amid rising tensions with Russia

    22 July 2024 - 10:56

    Biden pulls out of presidential race after analyzing poll data and party support

    22 July 2024 - 10:44

    US CENTCOM destroys Houthi unmanned boats in Red Sea

    22 July 2024 - 10:32

    Armenia - untrustworthy partner for any nation globally

    Expert insights on Caliber.Az

    22 July 2024 - 10:24

    Russian regions face intensive drone interceptions

    22 July 2024 - 10:19

    India evacuates over 4,000 students from Bangladesh amid ongoing unrest

    22 July 2024 - 10:07

    Erdogan: EU nations line up to purchase Turkish drones

    22 July 2024 - 09:55

    Presidential aide congratulates Azerbaijani media on National Press Day


    22 July 2024 - 09:50

    Tunisia calls on UNSC to put end to Israeli war crimes

    22 July 2024 - 09:43

    Saudi MFA: Israeli attacks on Yemen harm Gaza truce efforts

    22 July 2024 - 09:31

    Azerbaijani FM warns of consequences of Armenian provocations


    22 July 2024 - 09:20

    Turkish ice cream eaten with knife and fork

    22 July 2024 - 09:09

    Barcelona plans higher tax for short-cruise visitors

    22 July 2024 - 08:03

    Transit workers face surge in violence despite national crime decline in US

    22 July 2024 - 06:02

    Malaysia's presidents lead nation despite advanced years

    Age no barrier

    22 July 2024 - 04:03

    The Dubai party jet for hire for $15,000 an hour

    Luxury in the Skies

    22 July 2024 - 02:04

    American Airlines propels toward zero-emission future with hydrogen-electric engines

    22 July 2024 - 00:04

    President Biden steps down from 2024 race, endorses Kamala Harris

    21 July 2024 - 22:06

    Russian fighter jets intercept US B-52 bombers near border in routine encounter

    21 July 2024 - 22:02

    F-35 programme resumes deliveries with interim software solutions

    21 July 2024 - 20:03

    Foreign journalists witness devastation during tour to Azerbaijan’s Shusha


    21 July 2024 - 18:05

    Russia monitors West Nile fever spread amid imported cases

    21 July 2024 - 17:55

    Azerbaijan extends olive branch to Armenia with COP29 invitation

    21 July 2024 - 17:40

    German police foil IS terror plot targeting England's Euro 2024 final

    21 July 2024 - 17:30

    New era in the pipeline: Transformative changes in Southern Caucasus

    A region in transformation

    21 July 2024 - 17:16

    Russian fighters intercept US B-52 bombers near state border

    21 July 2024 - 17:01

    US professor: Azerbaijan’s Shusha summit tackles misinformation epidemic

    21 July 2024 - 16:46

    President Erdogan: Türkiye resolves global IT failure issues

    21 July 2024 - 16:31

    Erdogan: Equal status key to new Cyprus talks, warns against escalation

    21 July 2024 - 16:16

    Azerbaijan explores role of technology in combating disinformation

    As part of Shusha Global Media Forum

    21 July 2024 - 15:58

    Israeli PM to meet with Biden and address Congress during US visit

    21 July 2024 - 15:43

    Russia’s TASS deputy director warns of persistent global information wars

    21 July 2024 - 15:28

    Azerbaijani leader’s remarks on Armenia’s constitution reflect real conditions for peace - Georgian expert

    21 July 2024 - 15:13

All news