Yuan’s pop­u­lar­ity con­tin­ues to grow steadily, with rea­son

China Daily (Canada) - - WORLD -

Mark­ing the first time a new cur­rency has been added since the in­au­gu­ra­tion of the euro in 1999, the In­ter­na­tional Mone­tary Fund’s in­clu­sion of the yuan into its spe­cial draw­ing rights bas­ket two years ago was hailed by China as a “mile­stone” and “af­fir­ma­tion” of the coun­try’s fi­nan­cial re­form and open­ing-up.

It also caused quite a stir, with some voic­ing mis­giv­ings that the coun­try’s in­com­plete cap­i­tal ac­count con­vert­ibil­ity process would mean the yuan would fail to be­come a true in­ter­na­tional re­serve cur­rency, while oth­ers fear­ing that China’s com­mit­ment to fi­nan­cial lib­er­al­iza­tion might fal­ter af­ter its cur­rency was in­cluded into the SDR bas­ket.

The in­creas­ing con­fi­dence of other coun­tries in the use of yuan, the fast and steady rise in the yuan’s share in global for­eign ex­change re­serves and China’s unswerv­ing fi­nan­cial open­ing-up over the past two years, have proved such wor­ries to be un­founded.

In the sec­ond quar­ter of this year, the yuan’s share in global cur­rency re­serves re­ported to the IMF jumped to 1.84 per­cent, up from 1.4 per­cent in the first quar­ter of this year and 1.08 per­cent in the sec­ond quar­ter of last year, ac­cord­ing to IMF data.

Although the yuan’s share is small com­pared to that of the US dol­lar and the euro, which ac­count for more than 62 per­cent and 20 per­cent re­spec­tively, con­sid­er­ing that it has only been in­cluded in the IMF cur­rency bas­ket for two years, the rise in its share is re­mark­able. And the grow­ing pref­er­ence for the yuan is not with­out rea­son. Although in the short term, the yuan does face heavy pres­sure given the strength of the US dol­lar and the trade dis­pute with the United States, China’s stable eco­nomic fun­da­men­tals and fi­nan­cial open­ing-up poli­cies, will en­sure that the yuan’s pop­u­lar­ity will con­tinue to grow and its share in global re­serves con­tinue to rise in the com­ing years.

China has vowed to fur­ther open up its econ­omy. In terms of fi­nan­cial open­ing-up, it has stepped up ef­forts to lib­er­al­ize its cap­i­tal ac­count; it has also an­nounced this year it will fur­ther open up its bank­ing, se­cu­ri­ties, in­sur­ance and fu­tures sec­tors, mak­ing them more ac­com­moda­tive to in­ter­na­tional in­vestors.

The op­por­tu­ni­ties of­fered for­eign in­vestors and China’s in­creas­ingly more dy­namic fi­nan­cial mar­ket and re­silient econ­omy will only in­crease ex­ter­nal con­fi­dence in the world’s sec­ond-largest econ­omy, which will serve as a solid foun­da­tion for the grow­ing de­mand for the yuan.

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