Chinese yuan claims amounted to $336.1 billion in the fourth quarter of 2021, or 2.79 percent of total allocated foreign exchange reserves, the International Monetary Fund (IMF) survey showed on Thursday.
According to its COFER (Currency Composition of Official Foreign Exchange Reserves) data, the Chinese currency’s share rose to 2.66% in the third quarter. At the end of 2021, the yuan was fifth in COFER after the US dollar, euro, Japanese yen and British pound.
IMF experts attributed the share’s growth to China’s economic rise and the internationalization of the yuan. They said the renminbi’s growth would accelerate this year amid sanctions between Russia and the West and global financial chaos.
The data showed that more than half of all central bank foreign exchange reserves are still held in US dollars. However, the attractiveness of the greenback is gradually diminishing. Thus, in 2007, about 70% of all central bank reserves were in US dollars, with that number falling to 58.8% in the fourth quarter of last year.
Meanwhile, the scale of yuan foreign exchange reserves is also gradually increasing. In the last three months of 2021, renminbi claims in foreign exchange reserves amounted to more than $336 billion, compared to $320.1 billion in the third quarter of last year.
Experts said the rise in the yuan’s proportion and magnitude is an irreversible trend, as the currency’s influence grows along with China’s rising economic power.
The prestige of the US dollar and the euro has beenstrongly shakenby anti-Russian sanctions, which are now pushing more and more countries to switch to national currencies in settlements with foreign partners, according to Dmitry Peskov, press secretary to Russian President Vladimir Putin.
“Indeed, against the background of these rogue sanctions games, the prestige of the dollar and the euro has been shaken, above all, [the role of] the dollar as the main reserve currency,” Peskov said in an interview with the Belarus-24 TV channel.
The representative of the Kremlin drew attention to the fact that more and more countries are turning to national currencies in their mutual settlements.
“This process is now in its infancy, but it is no longer possible to stop it,“The official stressed, adding that the whole Bretton Woods system”that held America to the top of the world’s economic pyramid for many decades…is now beginning to erode.”
The Bretton Woods system created a collective international exchange rate regime, requiring a currency pegged to the US dollar, which was in turn pegged to the price of gold. It effectively made the US dollar the world’s main reserve currency. But now, according to Peskov, this system “will be completely swept away“as a country”transfer relations to national currencies, and this practice will develop.”
According to Peskov, the world will only benefit from the fact that this mechanism is changing.
“There are many options here, and all of this is a prototype of the future economic system, the formation of which we are now witnessing,” he noted.
Although settlements in national currencies existed before, they were not widespread. However, last month a number of Western states, including most of the EU and the United States, imposed sanctions on Russia in retaliation for its military operation in Ukraine, launched in February.
As part of the sanctions packages, much of Russia’s foreign assets were frozen, while the country was also cut off from the SWIFT interbank messaging system, compromising Russia’s ability to make settlements with foreign partners in euros and dollars. In response, Moscow announced last week that it was changing payment mechanisms for exports to “unfriendly” states that imposed sanctions on Russia, starting with natural gas. Buyers must now open ruble accounts in Russian banks, so that payments to Russian gas suppliers can be made in the Russian currency, the rouble. Moreover, Russia is in talks with a number of its foreign partners, including India and Turkey, offering to set up payment mechanisms in their respective national currencies in order to escape the dollar and the euro. , whose reliability is now compromised.
Peskov said these steps are just the start of a larger shift. While for now Russia is only changing the payment procedure for its natural gas exports and only with countries deemed “unfriendly”, this decision itself sets a precedent and can be replicated in other sectors and with other partners.