Yuan at all-time low

The yuan is far from replacing the US dollar as a global currency.

The Chinese yuan has fallen to its lowest level compared to the US dollar since the financial crisis in 2008. It is in good company because the euro and the British pound have declined by a similar level. But should the currency of the world’s second-largest economy by now not be in a better position than the EU to stand up to the dollar? At present, there is little sign of that. The Chinese yuan is still far from being a global currency.

The world is in an economic crisis. The Americans raise interest rates and what has always happened in the past decades happens again: investors seek shelter with the US dollar. Thanks to rising demand, the global currency is now more expensive than it has been in 20 years. At the same time, the Chinese yuan dropped to its lowest value since 2008, even though the currency is not even freely tradable. And even though China is doing much better than the US in terms of foreign exchange reserves, foreign debt, and trade balance.

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