Chinese yuan becomes most traded foreign currency on the Moscow Exchange, surpasses the US dollar

[beijingwalker]

Why Chinese don't work to strengthen their currency? They have the capability to do so,

China is still afraid of any move that will be perceived by the west as "threatening".

Maybe in few decades ....

Now it's a dillema for China, China holds one third of the world total foreign reserves, over 3 trillion dollars, most in US dollars, because of the massive trade surplus China has with the rest of the world, billions of US dollars still pour into Chinese accounts on daily basis, it's not easy for China to work out a mechanism to replace dollars in a short span of time, but China is working on it.

 

[_Nabil_]

Now it's a dillema for China, China holds one third of the world total foreign reserves, over 3 trillion dollars, most in US dollars, because of the massive trade surplus China has with the rest of the world, billions of US dollars still pour into Chinese accounts on daily basis, it's not easy for China to work out a mechanism to replace dollars in a short span of time, but China is working on it.

First time I hear trade surplus and trillions dollars are a problem!

Buy islands all over the world, companies and huge arables lands in South America, build gas and fuel pipe lines all over the world, ....

Get rid of the dollars and make your currency worth something so you can really be a super power.

 

[Ahmadbhutta01]

Guide a layman, what if most countries start trading in yuan ,rubble or regions in their own currencies will it bring dollar price down, and if US$ collapse what would happen to debts of countries

 

[jhungary]

Guide a layman, what if most countries start trading in yuan ,rubble or regions in their own currencies will it bring dollar price down, and if US$ collapse what would happen to debts of countries

If most country started trading with Yuan and Rubble. It will push the international demand of Yuan and Rubble, which mean Yuan and Rubble would have to increase their own currency circulation, which mean inflation.

How much of an inflation would equate to how much it has taken the USD share. At this point US Dollar is about 58% of world reserve. Rouble is NOT in the international basket. And Chinese share is around 2 to 3%. If both have the share and taken up the 58% to replace the USD, the currency market within China would have to expand 10% and Russia 25. All in the while US dollar lost their value, everyone holding any USD (Bond, Cash, Credit, Loan) would have their value decrease, which is good for America because effectively you don't need to repay that much USD, while the holding of USD asset will suffer, because essentially what you are holding don't worth as much as it used to as USD devalued.

Which mean in this case, USD would lower its value, while China will lose whatever USD asset they are holding and inflated to up to 25% of their currency value, which mean China would have hit by a double whammy. Russia on the other hand, would just be hit by Inflation.

At this point, I should say, there are no way for any country to replace US Dollar 1 to 1 without committing Financial Suicide. As USD market is very big, and to replace that, that country would have to expand their financial strength to match the current USD strength. Which means somehow, they would have to increase their financial market by at least 8 trillion dollars worth of currency.

 

[Mista]

Moscow is one of the top financial centers in the world? I beg to differ, who told you that?

Wow you must be so smart to be unable to detect sarcasm, I hope you don't beg to differ on this.

 

[Mista]

Guide a layman, what if most countries start trading in yuan ,rubble or regions in their own currencies will it bring dollar price down, and if US$ collapse what would happen to debts of countries

Not necessarily. Most countries hold USD in reserves not because it's the most traded currency, but also because the US has the most advance, liquid and deepest financial markets by far. There's a wide range of securities to invest in from treasuries to bonds to equities.

Even as a retail investor, I invariably venture into the US markets because they have the most vibrant and dynamic companies across a wide range of industries which offer good returns with track record. If you are a large hedge fund or SWF which handle billions to trillions, you basically can't avoid the US financial markets if you want to optimize your portfolio because only they have that deep pool of financial assets to absorb your capital, diversify the risks, and offer good returns.

If you are in charge of a SWF with $100bil fund, will you invest a large part of the funds in Chinese assets? If so, how are you going to allocate your capital in China notwithstanding their strict capital controls? Are you going to buy their properties, their largest asset class, which are illiquid and generate little yield? Or invest in their casino stock market, which is dominated by SOEs and where prices are not necessarily determined by the market? Why do you think their top private companies like Alibaba, Baidu, Tencent, Xiaomi etc are not listed in mainland China? Can their financial reporters freely report negative news about SOEs to inform investors without approval from some cadre or whatever official it is? Can Chinese investors freely access foreign news?

You see, it's not just economic reforms but also major legal and political reforms they have to carry out for foreign investors to participate in their markets. Transparency, reliability, rule of law are very important, and in these aspects they still have a long way to go. It's not just becoming the second largest or largest economy and the RMB will naturally become the preeminent reserve currency. In the first place I don't have to hold my reserves in your currency to trade with you, and similarly you don't have to hold your reserves in my currency to trade with me. That's why despite China as the largest trading country, the world only holds 2.88% of their reserve currency in RMB.

 

[beijingwalker]

Taiwan TV reporting Chinese Yuan overtaking US dollar in Russia

 

[Foinikas]

Yen is the third most traded currency in the world though