China’s Yuan is slowly becoming global as Germany’s central bank has decided to add the currency to its reserves. Apart from Germany, Russia also added Yuan to its foreign currency reserves, boosting the presence of yuan in the country’s financial market.
Andreas Dombret, board member of the bank “Bundesbank” broke the news of adding yuan to the bank’s reserves.
European Central Bank added $611 million to its reserves in 2016, which inspired the German bank to do the same. Andreas told the media,
The renminbi [yuan] is used increasingly as part of central banks’ foreign-exchange reserves – for example, the ECB included the RMB but also other European central banks did so.
Talking about the amount added by european central bank, Andreas added,
It is not a major amount but it is something that we decided on and that we want to be part of. The fact that the renminbi is now included in the SDR (Special Drawing Rights) basket and the fact that the ECB has decided to do that are both factors we thought about.
Part of IMF’s Reserves
2016 was a major year for the Chinese currency’s global recognition. International Monetary Fund (IMF) added Yuan to its reserve account making it the fifth currency to be a part of its reserves. It is the only addition to IMF’s foreign currency reserves after 1999 when Euro was added. Currently these currencies are being used in IMF’s reserve basket.
- Japanese Yen
- US Dollar
- British Pound
China has been criticized and accused of alleged exchange rate manipulations several times. Despite that, IMF told that the decision was taken considering the evolution of Yuan over the past decade in open market. Pakistan also announced that Yuan will be used in trades involving CPEC between China and Pakistan.