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Chinese Currency In The International Financial System

chinese yuan international financial system
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EDITOR'S NOTE: As some analysts have predicted, Washington’s sanctions on Russia are beginning to backfire. According to reports published by The East African, Saudi Arabia is considering pricing its oil in Chinese yuan. This slight move toward de-dollarization is indicative of what other nations might be “thinking” if not yet “doing.” If this geopolitical arrangement moves forward, then it signals the beginning of the end for the US dollar’s long-standing hegemony. It also ushers in the yuan as a potential contender for world reserve currency status. Although China has forged itself as an economic superpower over the last decade, it was the International Monetary Fund’s inclusion of the Chinese currency in the international financial system via IMF’s Special Drawing Rights that arguably legitimized China’s standing in the global economy. As a result, the dollar and yuan are now locked in a battle for global dominance. And given the state of US international policy, it doesn’t appear that the dollar is garnering the same level of support that it did nearly 80 years ago when the US was the largest and most stable economy in the world.

Summary

  • This comes six years after the International Monetary Fund included the yuan in its Special Drawing Rights (SDR) basket, signalling a vote of confidence by the fund in the yuan and increasing adoption of the Chinese currency in the international financial system.
  • The yuan’s inclusion in the IMF’s basket of reserve currencies on October 1, 2016, marked a milestone for the Chinese government’s campaign for recognition as a global economic power.
  • The yuan joined the dollar, the euro, the yen and pound in the IMF’s SDR basket, which determines currencies that countries receive as part of IMF loans.

Saudi Arabia is considering pricing its oil sales to China in Chinese renminbi (RMB) or the yuan in a move aimed at taming the influence of the dollar in global financial system as Washington’s economic sanctions on Moscow send fears to holders of the greenback.

This comes six years after the International Monetary Fund included the yuan in its Special Drawing Rights (SDR) basket, signalling a vote of confidence by the fund in the yuan and increasing adoption of the Chinese currency in the international financial system.

The yuan’s inclusion in the IMF’s basket of reserve currencies on October 1, 2016, marked a milestone for the Chinese government’s campaign for recognition as a global economic power.

The yuan joined the dollar, the euro, the yen and pound in the IMF’s SDR basket, which determines currencies that countries receive as part of IMF loans.

According to the IMF, the yuan’s inclusion marked a milestone in the integration of the Chinese economy into the global financial system. IMF’s determination that the yuan is freely usable reflects China’s expanding role in global trade and substantial increase in the international use and trade of the yuan.

“We expect that inclusion of the RMB in the SDR basket will further support the already increasing use and trading of the RMB internationally,” said the IMF.

Originally published on The East African.

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