Ln November 24, the day the fire took place in Urumqi which provoked a wave of protests against zero Covid measures, the People’s Bank of China (PBC) published its “RMB Internationalization Report 2022”, the renminbi, the Chinese currency commonly known as the yuan. Specifically, it is an English translation of an original Chinese report that was posted online on September 23.
“Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era”the BPC is delighted with the international future of the yuan, as if to make people forget the nationalist and belligerent speech of Xi Jinping, delivered on the 20e Chinese Communist Party Congress (October 16-22). However, with a roadmap based on Leninist ideology for the years to come, the Chinese president has in fact signed the death warrant for the internationalization of the yuan.
It must be recognized that the second world power lacks neither the ambition nor the means to promote its currency within the international monetary system. In 2009, the party-state was already calling for an international currency to replace the greenback. During the launch of the “New Silk Roads” in 2013, Beijing clearly stated its objective of spreading the use of the yuan, before creating, two years later, the China International Payment System (CIPS) to manage cross-border transactions. in yuan.
Huge currency reserves
While the world admired its double-digit growth and the depth of its pockets, China was making acquisitions with a vengeance on five continents. Its colossal foreign exchange reserves gave it growing influence within financial organizations. In 2016, the CIPS integrated the Swift global interbank messaging network for securing cross-border payments, and the International Monetary Fund (IMF) entered the yuan in the basket of special drawing rights (SDRs), the very closed club of currencies of reference, “forgetting” moreover in passing that the yuan remains a non-convertible currency… The following year, the European Central Bank converts the equivalent of 500 million euros of US dollars into yuan in its foreign exchange reserves. Academic studies, expert reports and press articles on the irresistible rise of the yuan are then legion.
At the same time, the dollar is showing more and more signs of weakness. To circumvent Washington’s sanctions against Iran – including its banishment of Swift – the United Kingdom, France and Germany created, in 2019, a competing system, the Instex, with the blessing of China and the Russia. Certainly, the project of the European trio has fizzled, but it illustrates the erosion of the power of the dollar. Already in 2016, former Federal Reserve Chairman Ben Bernanke admits, in an article for the Brookings Institutionthat “exorbitant privilege” of the dollar… is no longer so exorbitant. In 2020, the share of central bank reserves (all? the main ones) is 59%… compared to 70% in 2000.
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