In terms of gross domestic product (GDP), China overtook Japan as the world’s second largest economy in 2010. In terms of currency composition of global reserves, however, the renminbi/yuan was still conspicuously behind the yen in 2020 (Wikipedia: USD 59.02%, Euro 21.24%, Yen 6.03%, GBP 4.69%, RMB 2.25%).
Whichever way you look at it, something just doesn’t add up. China had claimed to be the world’s savior by bailing the West out of the Great Recession of 2008. In 2020, China also claimed to lead the world to economic recovery from the pandemic. Meanwhile, all these years, China has apparently been pushing for digitalization of the RMB around the world. How come the RMB remains such an also-ran as a global reserve currency?
Evidently, Beijing can’t afford to let the RMB be a major global reserve currency anytime soon.
Evidence? Check out a recent speech by Zhou Chengjun, the research head of the People’s Bank of China.*
Needless to say, Zhou Chengjun is Beijing’s messenger. Never mind his lengthy delivery, Beijing’s message can be summed up in the following three sentences:
To internationalize the RMB is to internationalize China’s domestic market. At this point in time, China needs to be in more, not less, control of its economy. In other words, China is not itching to play the game of reserve-currency thrones.
Uncharacteristically mild in tone, Beijing acknowledges implicitly that China’s economy is not yet stable enough for wider exposure to the world. No surprise there.
--- Lingyang Jiang
*Caixin Media links:
https://www.caixinglobal.com/2021-06-25/why-china-cant-and-shouldnt-control-the-yuan-exchange-rate-part-2-101732070.html
Zhou Chengjun. Photo: Caixin
