Rising influence of yuan reflects China’s growth, financial openness: expert

ISLAMABAD: The consistent rise in international status and influence of the Chinese currency renminbi (RMB), or the yuan, reflects China’s robust economic growth, high-level financial openness and the financial market participants’ trust in China, an expert said.

China’s sustainable policies in the economic and political sectors and its pursuit of market-oriented reforms paved the way for the RMB to become a more significant player in international financial markets, Farhat Asif, president of the Institute of Peace and Diplomatic Studies, an Islamabad-based think tank, told Xinhua in an interview.

Citing a survey recently revealed by the International Monetary Fund (IMF) which shows that the RMB reserves held by global central banks climbed to 2.79 percent during the fourth quarter of 2021, the expert said that it not only highlights the RMB’s mounting role in the international reserve currency system, but also heralds China’s sustainable growth.

As the second-largest economy in the world, China is a key driver of global growth, Asif said, noting that China-proposed projects of high economic value, such as the Belt and Road Initiative, were born out of the country’s great economic development at home and its principle of win-win cooperation.

The expert believed that China’s principle of non-interference in the internal affairs of other countries, vision to promote world peace and security, and rejection of the Cold War mentality are also factors behind the stronger Chinese economy and currency.

Due to the political and economic stability in China, a number of countries have started trading in the RMB instead of the US dollar, she said, adding that there was a huge hegemony of the US dollar before, but now things are changing gradually as more and more countries are interested in doing business with China and make investments in the RMB.

The international status of the Chinese currency is going to be further enhanced in the coming years considering how China managed to maintain high-quality economic development domestically and remain a global economic powerhouse in the face of multiple challenges, she noted.

Despite uncertainties in the global financial markets against the backdrop of global issues including conflicts and the pandemic, China’s economic growth, market condition and the institutional environment remained encouraging, as the country continued to focus on the economic and institutional reforms and development, she said.

The establishment of a cross-border payment system by China also contributed to the promotion of its currency as the system has made it convenient for the countries that have well-built financial links with China to make transactions in the RMB, she added.

Expressing her confidence in the Chinese economy and the currency, Asif said that during times of confusion, investors have a tendency to turn to safety, diversifying their assets in more stable foreign currencies and seeking higher yields on their investments.

“Owing to its stability, RMB is going to be a more valuable asset internationally and an important choice for an international portfolio for investors to reduce their investment risks,” she said.

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