Having the world’s largest manufacturing economy China is on its way to the top. It has now taken over the Soviet Union’s spot establishing itself as the second-largest economy in the world following USA. China has the highest exports amongst any other countries in the world. This raises many questions. Can the Chinese Yuan possibly be used as an alternative to the US Dollar? Many financial analysts believe that it can. The Yuan is now being used widely throughout the world to conduct financial transactions.
The Chinese Yuan has a floating exchange rate whereby the rate of the currency is determined by the Central Bank of China. There are a few advantages of investing in Chinese Yuan. China’s economy is booming and flourishing which has led to a decrease in the poverty rate. It is now estimated that a percentage of the Chinese population has increased a 50-fold rise in their standard of living. The well-being of an individual in China has reached an all-time peak. From hopeless economic conditions in the 1970s to becoming a global financial giant, china has truly turned the tables. So much so, the Chinese Yuan is used by many countries when conducting trade activities with China. The financial trade transactions conducted using the Yuan are growing rapidly. Therefore, there is a chance that the Chinese Yuan will soon be used to conduct all international trades. In case this happens, the Chinese currency will get stronger.
Over the years, China has been purchasing US treasury bonds. This now makes the USA as a creditor to China rather than the other way round. China has also worked hard in improving its credit ranking alongside making a huge investment in the energy resource sector. The US free-market system has resulted in a lack of control of the US over its currency. However, China’s Central Bank remains in control over the Chinese Yuan.
China’s economic success didn’t occur overnight. It was rather a very well-thought-out plan which occurred as a consequence of government spending to enhance economic growth. The increase of the Chinese currency purchasing power has increased significantly over the course of a few decades. This financial breakthrough can be attributed to their aggressive economic reforms and collaboration between the state and private entities. All things considered, the Chinese Yuan can be considered as a viable investment and is giving tough competition to the US Dollar.