China’s yuan could become the world’s third largest reserve currency in 10 years, Morgan Stanley predicts

CNBC ^ | 09/06/2020 | Evelyn Cheng

[SeekAndFind]

Increased foreign investment into Chinese markets could boost the usage of the yuan, pushing it to become the third largest reserve currency in the world — behind only the U.S. dollar and the euro, Morgan Stanley analysts predicted in a report distributed Friday.

The forecast comes as the Chinese government has been trying for years to promote the international use of the yuan, also known as the renminbi (RMB).

Right now, the yuan accounts for about 2% of global foreign exchange reserve assets, the report pointed out. But it could rise to between 5% and 10% by 2030, surpassing the levels of the Japanese yen and British pound, the analysts said. The forecast reiterates one that the bank made in February 2019.

In the 18 months since, the Chinese government has stepped up its efforts to allow more foreign financial institutions into the domestic market. Overseas investors have also been increasingly turning to the Chinese market for the potential of relatively higher returns than that of other regions.

Investment portfolio inflows will become more important than foreign direct investment in the next decade, for a cumulative $3 trillion of inflows, Morgan Stanley predicted.

“We expect private and reserve managers will generate more than US$150 billion in total portfolio inflows to China in 2020, for the third consecutive year, highlighting the transformations underway. The annual inflow should reach US$200-300bn in 2021-30,” the report said.

With these investments, more global assets will be held in yuan, which has struggled to gain traction on an international level. The Chinese government has traditionally kept a tight grip on the currency, including preventing large amounts of capital from leaving the country.

However, in 2015 the International Monetary Fund made the politically significant move of adding the yuan to its basket of major reserve currencies

[neverevergiveup]

Or, their economy could implode.

[beancounter13]

Kind of hard for it to be a reserve currency as long as the CCP is willing to manipulate it.

Remember how the CCP let it fall as a rebuke to the tariffs?

[sauropod]

China is gunning for the yuan to be *the* world reserve currency.

[existentially_kuffer]

China can not handle national calamities. They feel the pain of not being able steal themselves to success.

[Alberta's Child]

The idea that China can have a dominant reserve country is ludicrous when you consider that it pegs its currency to the U.S. dollar. Isn’t this an open admission that it doesn’t even have a real currency?

[lp boonie]

Could not, too.

[MAAG]

Ha Ha, this world doesn’t have 10 years left.(the Age of Grace).

[Truthoverpower]

China’s dead meat The virus 🦠 they unleashed on the world Trump calling them on lying cheating stealing and threatening Europe is making noise against them The floods. Catastrophic Culling 650 million pigs. ( swine flu ) Much more. They’re in deep shiite

[Redmen4ever]

“could” is a big word.

Could but WILL NOT as long as the government maintains currency controls. The government would have to allow its currency to float for its currency to be used by even its partners in trade, no less by third parties.

To be sure, the incentives for returning to economic liberalization are enormous. But, the risk - from the government’s perspective - is also high. The risk is losing control. The takeover of Hong Kong tells us what choice the government will make.

[Gen.Blather]

Each time China has made their currency convertible to the currency of other countries, notably the dollar, billions of dollars have fled the country. The scramble to buy assets in the US is called capital flight. If they pay x for something and only get .5x back when they sell it, that beats losing everything by leaving the money at home. The idea that Chinese money will be a viable currency is ludicrous.