The biggest problem with Chinese currency investments’ fame and value are the currency’s (Yuan) scope and flow. Taking a walk down the memory lane, we do remember how the Euro became oh-so-popular after its introduction across the nations in the European Union
Similarly, the Yuan and Chinese currency investments are expected to strengthen and grow both in popularity and valuation.
Below are some reasons that endorse the fact that Chinese currency investments have a positive outlook and will get even better in the years to come.
- China is continuously budding to become a financial powerhouse and all the indications are positive. Just like the countries that typically trade using U.S dollars are now trading in Chinese Yuan to trade with China. This global demand will add to the overall strength of the currency.
- A significant rise in the transactions occurring in Chinese currency was reported by SWIFT that is the global leader in processing payment related messages
A report compiled by SWIFT reads:
“More than 1,050 financial institutions in over 90 countries are already doing business in the Chinese currency.”
- As forecasted by Financial Post:
“By 2015, about 30% of China’s cross-border trade will be settled in the renminbi. From 900 financial institutions conducting business in RMB in 2011, the number is now more than 10,000.”
This implies how the Chinese Yuan is gearing to become a strong universal currency.
- Hundreds of multinational businesses are already operating or intending to operate in China including those with financial needs for the end customers and themselves. For instance, BMW and other popular auto manufacturers don’t only sell their cars in China but also finance car purchases in Yuan.
- Countries including Hong Kong, Singapore, and Taipei have been acting as well-established sanctioned overseas settlement centers to encourage and ease transactions carried out in Yuan and for the issuance of the Yuan-denominated bonds.
- The sale of Yuan-denominated bonds was allowed by China in 2007. This was the one important move which contributed to the increased popularity of Yuan and ultimately the Chinese currency investments. In fact, the demand of the ‘dim sum bonds’, i.e. Yuan-dominated bonds, increased its supply. This compelled not only the government but also large corporations to offer the dim sum bonds. The Yuan-dominated debt market then kept doubling in size every year since the start of 2008.
- The United States has China as a net creditor, which implies that China holds solid portions of the U.S. Treasury Securities. It holds a good number of gold reserves and forex that have been playing a prominent role in increasing the country’s credit worthiness.
Secondary: Chinese Currency