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Dollar Vs Yuan: which is the future Global Currency? - Alldamoney

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Dollar Vs Yuan: which is the future Global Currency?



In 1978  China was a poor, communist country with just about 15 skyscrapers dotting  the skyline of Shanghai, China’s richest city. Fast forward to 2017, following decades of economic liberalization skyscrapers in Shanghai has reached  957  with the  Shanghai Tower being one of the tallest buildings on earth measuring about 632 meters.


Though by developed world standards, China remains a relatively poor country, (you need to visit the interiors of the country to understand the real meaning of poverty) the country has positioned itself as a world economy vying for the biggest world economy post with the United States.

In a symbolic blow to the U.S. recently, China and other developing countries mostly from the BRICS group took the step of undercutting the domination of the U.S. dollar as the international reserve currency by signing a deal with the Bank of China to bypass the dollar and pay each other in their domestic currencies.

The notion that the Yuan will soon replace the dollar was also further strengthened when the IMF included the yuan in the  Special Drawing Right or SDR, which have the U.S. dollar 41.73 percent (compared with 41.9 percent at the 2010 Review) Euro 30.93 percent (compared with 37.4 percent at the 2010 Review) and Chinese Renminbi 10.92.

So is China’s Yuan destined to replace the U.S. Dollar as the world’s primary reserve currency?

China’s population is four times bigger than that of the United States so therefore If per capita GDP grows at the average rate sustained between 2011 and 2015 in both countries then it will expand at the pace that China’s per capita GDP will overtake that of the United States by 2043.
Therefore, pushing the Chinese government bond market to become the world’s primary reference market for investors hoping to invest in the bond capital market. This prediction is simply the inevitable consequence of China’s population size and fixed income opportunity.

The opening of China’s capital account will establish the RMB as a global reserve currency which will further accelerate  the adoption of the RMB by central banks of most developing countries.

The Chinese government has indicated that it wants the Yuan currency, to replace the U.S. dollar as the world's global currency so as to give it more control over not just  its economy but the global world economy.
And it's taking steps to make that happen as its economic might grows. How and when would that happen remains to be seen.


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