China’s Trade Dominance Is Boosting Renminbi’s Reserve Status
- Research finds link between China trade and RMB reserves
- China will need dollar reserves to increase confidence in yuan
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China’s dominance of global trade provides a path to increase its currency’s share in global central bank reserves even if it retains tight capital controls, but Beijing will need to maintain large dollar reserves for that to happen, according to new research.
While the yuan isn’t on course to displace the dollar as the world’s dominant currency, it could play a larger role in a more “multipolar” financial world, economists including Barry Eichengreen of the University of California Berkeley and Camille Macaire of France’s central bank argue in a new paper hosted by the Center for Economic Policy and Research.