The International Monetary Fund (IMF) recently released the “Currency Composition of Official Foreign Exchange Reserves” (COFER) data for the first quarter of 2022. The share of global RMB reserve assets is 2.88%, ranking fifth in the world and achieving the highest level since the first quarter of 2020. “Nine consecutive rises”, while hitting a record high since the IMF announced its renminbi reserve assets in 2016.
In the first quarter of 2022, the scale of global renminbi reserve assets declined, mainly due to the reduction of foreign investment in renminbi bonds, and the net reduction of overseas renminbi bonds by 126.6 billion yuan, of which 21.6 billion yuan and 600 million yuan were respectively reduced in renminbi treasury bonds and policy financial bonds. The sharp decline in the scale of reserve assets is not limited to the renminbi. The dollar, euro, Japanese yen and global foreign exchange reserves have also declined as a whole.
Although the U.S. dollar index appreciated by 2.5% in the quarter, which helped boost the share of global U.S. dollar reserves, the U.S. economy has been affected by high domestic inflation and monetary tightening policies, which has led to a surge in U.S. bond yields this year, triggering a “double killing” of U.S. stocks and bonds. The boost from the strength of the dollar is limited; on the contrary, the euro reserve assets fell by $137.7 billion in the first quarter, a decrease of 5.5% from the previous quarter; the yen reserve assets fell by $38.9 billion, a decrease of 5.9% from the previous quarter, two The decline was larger than the global average, helping the global share of U.S. dollar reserves edged up by 0.02 percentage points. In addition to the US dollar, the share of renminbi reserve assets also bucked the trend.
Guan Tao, Global Chief Economist of Bank of China Securities.
Guan Tao, global chief economist of BOC Securities, believes that the data shows that China’s economy and finance remain relatively resilient even in the international environment of persistently high inflation, slowing economic recovery and intensifying financial turmoil. He also mentioned that a number of reserve currencies have risen, including the British pound, Australian dollar, Canadian dollar, Swiss franc and U.S. dollar. The increase in the share of the renminbi only ranks third, and the status of the top three reserve currencies in the world of the euro and the yen has not been shaken, which means that The development path of currency internationalization is bound to be tortuous.
Guan Tao pointed out that for the internationalization of the renminbi to be stable and long-term, the key is to do your own thing well. On the one hand, maintain the normal state of fiscal and monetary policies for as long as possible, ensure that the economy operates within a reasonable range, and maintain the stability of the actual purchasing power of the local currency; The rule of law and internationalization have created an increasingly convenient, transparent and predictable market environment for institutional investors, including foreign central banks.
Liao Qun, chief economist at the Chongyang Institute for Financial Studies, Renmin University of China.
Liao Qun, chief economist of the Chongyang Institute for Financial Studies, Renmin University of China, pointed out that the current proportion of RMB in global foreign exchange reserves does not match China’s economic scale and volume of trade and investment, indicating that there is a lot of room for improvement in the internationalization of the RMB in the future. . He described that promoting the internationalization of the RMB is an important direction for the reform and opening up of the country’s financial sector. With the continuous improvement of the internationalization of the RMB, China will have a greater say in the global trade market and investment market. Trade and investment will become more flexible and gain more dominance in it. In the long run, in order for China to become a powerful modern socialist country, the RMB must be internationalized in order to match its status.
It is worth mentioning that two recent events have fully reflected that the RMB is going international. On June 25, the Bank for International Settlements (BIS) announced that it has jointly formulated the RMB Liquidity Arrangement (RMBLA) with the People’s Bank of China, through the reserve fund pool plan, to provide liquidity support for the central banks participating in the arrangement when the financial market fluctuates. In May of this year, the IMF Executive Board completed the five-yearly review of the value of the Special Drawing Rights (SDR), raising the weight of the RMB from 10.92% to 12.28%, an increase of 1.36 percentage points.