The yuan has surpassed the yen and the euro to be the world’s #2 currency, behind only the über-powerful American dollar in global finance transactions. China’s currency made a huge leap from the beginning of 2012, where it constituted less than 2% of world trade finance currency, to a huge 8.6% in October of this year. Suck it, yen.
The dynamics of international currency conversion, financial fluxes, and monetary meanderings are a slight smidgen above this Shanghaiist writer’s pay grade, but the tweed-jacketed mahogany-paneled columnists at the Washington Post Wonkblog have broken it down for us:
One can easily imagine the renminbi being the dominant currency for financing trade within Asia within a few years.
It is no accident. The Chinese government has long sought a role as a financial power to match its economic might. It has sought to establish Shanghai as a financial capital on par with London or New York. Internal advocates of reform, particularly at the People’s Bank of China, have used this nationalistic goal to push for the changes that China will need to undertake if it to achieve those goals: Allowing a more free flow of capital in and out of China, backing away from its aggressive interventions to depress the value of the currency, and encouraging the development of modern bond markets.
Maybe if the renminbi does take off as a serious international competitor to the dollar (which still has a staggering 81% use in global finance trade), we could hope for an aesthetic makeover on the country’s cash. One man on every domination and coin just seems a bit much, thank you.