A couple of decades ago, the Renminbi (the Chinese Yuan) used to be called «toilet paper». These days, this is among the world's TOP 10 currencies. Its share in the global currency reserves has quadrupled from 2% to 8% over the last few years.
At this point, the Chinese Yuan has almost ousted the US Dollar from Eastern Asia. The Renminbi definitely rocks there! Still, this is not the end.
According to the analytic team working for HSBC, the Chinese Yuan is going to become the 3rd global reserve currency along with the US Dollar and the common European currency by 2017. Yet, some experts say that the Renminbi may well become the world's major reserve currency in the near future. Is there really a chance for the Chinese currency to oust the US Dollar from its status of the major global reserve currency?
Let's ponder on this question together with Masterforex-V Academy.
According to HSBC, the Renminbi will start conquering the world this year. This process will include 3 stages:
Stage 1. The Yuan becomes a major currency. Actually, this has already happened. Over the last 3 years, the Chinese Yuan has already outpaced 22 other currencies and is now among the TOP 10 most traded Forex currencies (according to SWIFT). On top of that, the Renminbi is said to be the 7th most popular currency in external trade. It outpaced even the Swiss Franc. In 2015, the Chinese currency is expected to enter the TOP3.
The experts expect that by that time over 50% of China's external trade with other nations will be done in yuans. For comparison sake, it was just 3% 4 years ago.
Stange 2. The Renminbi becomes an investment currency. The People's Bank of China already emitted 2,5bn yuans in bonds. In early January, a Chinese investment funds started trading in London. By the way, this happened for the first time in many years. And finally, not so long ago, the Bank of England and the People's Bank of China signed an agreement to create a clearing house and several offices working with the Renminbi in London.
All in all, China singed currency swaps with more than 20 other nations and still counting.
Yuan deposits make at least 12% of all the deposits in Hong Kong banks (they used to be 1% 5 years ago). There are 4 offshore centers working with the Chinese currency: Hong Kong , Singapore, London and Taiwan. In late March, mass media reported about a currency swap signed between the central banks of China and Germany.
Stage 3. The Yuan turns into a global reserve currency. HSBC experts assume this is going to happen in 3 years, i.e. much earlier than expected. This is the time when the Renminbi will start ousting the US Dollar to replace it as the world's major reserve currency.
Indeed, the Yuan is approaching the top of the currency pyramid very fast. Sooner or later, it is going to challenge the American currency, Masterforex-V Academy report. This has to do with several factors, including the pace of economic growth in China, the size of the Chinese economy, its gold reserves, bonds, GDP and may other things.
The only thing left to do is to persuade the rest of the globe in the stability and reliability of the Renminbi so as to make the world switch from the fiat American currency to the Chinese currency, which may well be backed by gold.
Some interesting things in the Chinese economy back the strengthening of the Chinese Yuan against the US Dollar. One of them is China's huge GDP coupled with a relatively small income per capita.
As of today, the Chinese Yuan is trading in a narrow price range against the US Dollar, Masterforex-V Academy reports. The closest levels of resistance are 6,2304 and 6,2325. The closest levels of support are 6,0580 and the bottom of the MF sloping channel.
