On October 18 President Xi Jinping will preside in Beijing over the most important political event in five years. At the Communist Party's 19th congress much will be made of the triumphs achieved in nearly four decades of reform and opening up. So expect a glossing over of one part of that process where progress has largely stalled: the “internationalisation” of China's currency, the yuan.
This seems odd. Just a year ago the yuan became the fifth currency in the basket that forms the IMF's Special Drawing Right. This marked, in the words of Zhou Xiaochuan, China's central-bank governor, in a recent interview with Caijing, a financial magazine, "historic progress." Symbolically, China's monetary system had been awarded the IMF's seal of approval. A further boost to prestige was the announcement in June this year that some Chinese shares would be included in two stockmarket benchmarks from MSCI.
Yet the yuan's international reach has in fact fallen in the past two years. It has regained its ranking as the world's fifth most active for international payments, after slipping to sixth in 2016. But its share of this market has slipped from 2.8 percent in August 2015 to 1.9 percent now.
Use of the yuan in global bond markets over this period has fallen by half, as companies have instead raised funds within China. In Hong Kong, the largest offshore market, yuan deposits have plunged by 47 percent from their peak in December 2014. Of the foreign-exchange reserves held by the world's governments, just 1.1 percent are in yuan, compared with 64 percent for the dollar. ...
... For the remainder of the commentary:
https://www.economist.com/news/finance-and-ec...0-and-forthc... * * *
