The yuan will never become a reserve currency as long as China maintain tight currency controls around importing and exporting it. It's very difficult to (legally) send CNY out or China.

The euro is in a much better position to be adopted as an alternative, but its share of global reserves has been flat at around 20% for years.

https://data.imf.org/en/news/imf%20data%20brief%20march%2027

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somenameforme 3 hours ago | parent | next [-]

Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. It's too much power that's too tempting to abuse. But they also learned from the collapse of Bretton Woods that even orchestrated agreements with built-in penalties just don't work, because countries can simply ignore them when beneficial.

So I think we're headed to a future where no currency will dominate. This is probably also why the dollar's decline doesn't have any clear successor filling the vacuum. If anything, countries are accumulating far larger stores of gold. I expect this is also why BRICS is having difficulty creating their own trading currency. No countries can, or should, trust other ones which complicates matters greatly.

	▲	jcfrei 15 minutes ago \| parent \| next [-]
		> Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. That's a misleading statement. First of all at the beginning of the 20th century the British pound was clearly the global currency - where a lot of the international commerce happened. Then towards the 1930s and later on the Dollar took over that role. But that role carried much less weight back then - globalization was still in its infancy and a "global reserve currency" as we understand them today simply didn't exist back then. Right now some Dutch pensioners money is invested in American, Canadian, Australian, German, etc. companies. And the parts for most consumer goods are coming from all over the world. Pre Bretton Woods basically none of this existed. This global financial system we speak of today is unprecedented and only exists since the late 70s - where most countries abandoned their currency controls (apart from the US and CH which never really had them).
	▲	david927 36 minutes ago \| parent \| prev \| next [-]
		This is exactly my take. Except I think there was never an interest by China to make the yuan the new global reserve currency but instead slow walk it back to a gold standard, and that's what has been happening since 2008. If a single country's currency is the global reserve currency, all you're finding out is whose thumb you're under.
	▲	nradov 35 minutes ago \| parent \| prev [-]
		No country is accumulating more than token amounts of gold. There just isn't much physical gold available relative to the size of the world economy.

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westpfelia 3 hours ago | parent | prev | next [-]

No, and I dont think China wants the Yuan to be the reserve currency. But this is a good step in allowing better currency trading/exchange. Which can make imports between the EU and China cheaper.

	▲	tommica 3 hours ago \| parent [-]
		For a moment, after that EU will come up with a new regulation / taxation causing everything to become more expensive again.

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thehumanmeat 3 hours ago | parent | prev | next [-]

Exactly. It's always been posturing.

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mrtksn an hour ago | parent | prev | next [-]

what’s stopping China from dropping currency controls in a ab afternoon? It’s not like this is some force of nature.

	▲	curuinor an hour ago \| parent \| next [-]
		It's like 6-7 CNY to USD right now. If that goes to 1 or 2 (if the CNY rises dramatically in price wrt the USD), then everything imported from China to the US explodes in price. Explosion in price, the imports reduce dramatically. So Chinese exports, which comprise like a quarter of their GDP, implode.
	▲	chii 37 minutes ago \| parent \| prev [-]
		china won't want to drop the advantages of being able to have such tight control over the flow of yuan. Maintaining control over capital flight from china, for example.

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brazukadev 2 hours ago | parent | prev | next [-]

The yuan doesn't need to become a reserve currency for it to impact the US dollar. 15%+ of global trade is Chinese import/export. China is the biggest buyer and seller to most countries.

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phkahler 3 hours ago | parent | prev | next [-]

>> The yuan will never become a reserve currency as long as China maintain tight currency controls around importing and exporting it. It's very difficult to (legally) send CNY out or China.

Did you read the article? It seems that may be changing.

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intrasight 3 hours ago | parent [-]

Neither the word "free" nor "float" is present in that article - so I'd say no the article does not discuss that.

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swat535 2 hours ago | parent [-]

China's goal is weakening the dollar, I don't think they are after reserved currency status.

In any case, moving from USD -> Yuan would pose the same risk as people may perceive with USD today.

Having a single currency controlled by one nation is too risky.

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kasey_junk an hour ago | parent [-]

China doesn’t broadly want a weaker dollar, at least not against the yuan. Until very recently they actively worked to strengthen the dollar in the pair.

Chinese currency policy is broadly about controlling their domestic population not about foreign policy. Between keeping their domestic manufacturing industry going and keeping their more affluent populations power in check you’ll find most of the motivation for what they do on currency policy.

This move gives one less reason to allow a currency transaction and thus one less way for domestic manufacturers (and importantly their management) to get around those capital controls.

As European Chinese business increased that became more important and Duetche is dominant in fx, being able to handle effectively everything now means European businesses won’t complain either.

	▲	curuinor an hour ago \| parent [-]
		"weakening" and "strengthening" often confuses lay peeps really hard on this subject, as a plain source of confusion. "cheaper" and "more expensive" are frankly better words

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seanieb 3 hours ago | parent | prev | next [-]

Does the world still require a reserve currency? Spreading risk across the Dollar, Yuan, and Euros seems more logical. While the hurdles and friction associated with foreign exchange (FX) and international transfers were significant when reserve currencies were crucial, they are not as big an issue today.

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TacticalCoder 3 hours ago | parent | prev [-]

> The euro is in a much better position to be adopted as an alternative, but its share of global reserves has been flat at around 20% for years.

The Euro is only 25 years old: it would be pure folly to make the "reserve currency" something that recent.

Then... One country of the eurozone already partially defaulted on its public debt (Greece, in 2015). And France is running an insane deficit: so bad that there are now talks of the International Monetary Fund taking control of France's public finances. France had to raise the yield on its debt to its highest level since nearly 20 years. France cannot reach the "only 5% of GDP" in yearly public deficit, on top of an already insane public debt: it is snowballing and the only outcomes are going to be miserable for the people (and for the EUR).

An economist, before the EUR began circulating, explained by which mechanisms the EUR would lead to Spain, Greece and then France default on their public debts. That economist explained how the EUR would lead to "too many secondary houses in Spain" and "too many public servants in France". When Greece did default on its debt, that economist said: "I was only wrong on the order on which these countries would default".

One would be crazy to make a reserve currency a currency that's a mix up of countries that have different productivity and different fiscal laws.

The EUR is one of the worst currency ever conceived and it could turn out to also be one of the shortest lived currency.

	▲	RandomLensman 3 hours ago \| parent \| next [-]
		There is no serious talk on the IMF taking control of French public finances. The spread between France OAT and German Bunds is less than 100bps. The French annual budget deficit is lower than the projected US one.
	▲	mschuster91 3 hours ago \| parent \| prev [-]
		> That economist explained how the EUR would lead to "too many secondary houses in Spain" and "too many public servants in France". The part relating to France is the usual small-state BS that has thoroughly corrupted modern "economics". France's problem more is its power generation, they rely on nuclear power, a lot of their fleet is noticeably aged and desperately needs replacement, but such replacement is incredibly expensive. On top of that, French military expenditure is ridiculous, they still dream of being an empire, maintain nuclear weapons and aircraft carriers, that make sharing vessels or aircraft with other European countries a pain - as evidenced by FCAS collapsing, the French wanted to use us Germans as paypigs for their pet project suited to carrier deployments.