Saturday, May 23, 2015Saturday, May 23, 2015

Will a rising yuan topple the dollar?

Published on Apr 15, 2014 1:30 PM

Much has been written about whether China's yuan will ever join the lofty ranks of the world's reserve currencies, but central banks now appear to be settling that point on their own.

Over 40 of them - including Singapore's - have been investing in the yuan and more will soon join them, as observed by Standard Chartered's Singapore-based global head of central banks and sovereign wealth funds last week.

"The (yuan) has effectively already become a de facto reserve currency because so many central banks have already invested in it," Mr Jukka Pihlman told the South China Morning Post.

His remarks, following China's recent moves to liberalise its unit, have reignited a debate about whether the yuan will eventually succeed the greenback as the world's main reserve currency.

Enjoy 2 weeks of unlimited digital access to The Straits Times. Get your free access now!

Background story

If the yuan is to be even a major reserve currency, China's political system, central bank and monetary policy must shed their opacity to an extent almost unthinkable now.

Will China consider these trade-offs worth its while?