As the yuan's currency grows silently at the global level and investment continues to flow steadily, the international monetary system dominated by the dollar has begun to undergo changes.

In a report published by the Spanish site "Rebelion", writer Hidelberto Lopez Blanche said that the value of the currency of the People's Republic of China is not underestimated, as it is playing an increasingly important role in the international arena, indirectly affecting the dominance of the dollar.

In the twenty-first century, the yuan (or the renminbi) is one of the most widely traded currencies, and everything indicates that it will sooner or later become part of the exclusive group of the most important international currencies of weight.

The writer mentioned that the group of currencies recognized by Western financial institutions includes the US dollar, Australian, Canadian and New Zealand dollars, the euro, the British pound, the Swiss franc, the Japanese yen, the Norwegian and Swedish krona.

To understand how the yuan currency is developing, the Bank for International Settlements data indicates that in April 2019, the average daily circulation in the yuan was about $ 285 billion, a figure that China maintained in 2020 also despite the repercussions of the global economic and financial crisis caused by the pandemic. Covid-19 ".

The writer pointed out that the latest reports issued by the foreign exchange trading system in China indicate that on November 16 this year, the daily trading volume of the yuan in the internal transactions of the Asian giant reached about $ 45 billion, the highest number recorded since December First 2018.

According to the Bank for International Settlements, the currency exchange rate also rose to its highest level since 2018, at 6.5395 yuan against the dollar, recording a growth of more than 8% during the past six months, which is the largest strengthening of Asian currencies after the Korean won.

At a time when the yuan strengthens, the dollar weakens, which greatly benefits the Chinese currency (Reuters)

The yuan improved

Among the reasons that explain the improvement in the value of the Chinese yuan are the stability of the economy and the success of the approach adopted by China in confronting the repercussions of the Corona virus and its ability to control the spread of the epidemic, in addition to reactivating the entire production and export process, outperforming the policies of most Western countries, especially the United States, as The Donald Trump administration has failed miserably in the face of the pandemic.

At a time when the yuan strengthens, the dollar weakens in a way that greatly benefits the Chinese currency, not to mention that the yuan-denominated assets are supported by high interest rates that exceed the assets denominated in other currencies.

The writer pointed out that investors are now showing more interest in this currency, as the Asian country has taken the lead in recovering from the epidemic and its economy is expected to be the only major economy in the world that achieves positive growth in 2020.

The writer believes that the US economic and financial sanctions policy, which affected many countries during the four years of Donald Trump's term, prompted the Chinese, Russians, Turks, Iranians, Venezuelans, Indians and even Europeans to search for another alternative currency for circulation.

And recently, the World Bank indicated that China's growing role in international trade and the size of its economy, in addition to its emergence as the largest creditor in the world, all this makes the internationalization of its currency - which is moving steadily towards global hegemony - possible.

In 2016, the International Monetary Fund added the yuan to the basket of special drawing rights currencies, with it included in the basket of currencies that this international entity uses as a measure of value, along with the dollar, the euro, the yen and the pound sterling, and at the end of 2019, at least 70 global central banks have reserves. From the yuan in foreign exchange, compared to 60 banks in 2018.

China's growing role in international trade and the size of its economy make its currency internationalization possible (Reuters)

Most traded

Many experts around the world predict the possibility of converting the yuan into the most traded currency in the market in the next ten years and outperforming the dollar.

It is noteworthy that the Chinese currency still lacks objective conditions to be fully convertible, especially since its owners cannot exchange it in central banking entities at any time, but it is now clear that the Chinese central bank is already working to establish a system for settling cross-border payments and investments in yuan. Which will gradually increase its convertibility.

The writer stated that 5 of the 12 largest economies in the world already maintain their trade exchanges in this currency, namely (Japan, India, Russia, Brazil and South Korea), and other countries have joined them, such as Argentina, Venezuela, Australia, Iran, Belarus and many Asian countries, and companies in Beijing use the yuan currency in Its exchanges with 181 countries continued its expansion in the world unabated.

The largest free trade agreement in the world, known as the "Regional Comprehensive Economic Partnership", which includes 15 countries in the Asia-Pacific region, and the continued expansion of the so-called Silk Road that will include Europe, Africa and Latin America, will strengthen the efforts to internationalize the yuan currency that is advancing. Gradually, steadily and safely, following in the footsteps of the dollar, which remains strong despite its declining value.