Will the yuan be the world's main reserve currency in the near future?By the end of the decade China will be dominating the global economy. It will account for 21% of the world's GDP compared with...

Will the yuan be the world's main reserve currency in the near future?

By the end of the decade China will be dominating the global economy. It will account for 21% of the world's GDP compared with under 15% for America; its trade will be 40% greater than America's; The dollar may lose its international status as a trade-settlement currency within Asia.

Asked on by gopikrishna

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

First of all, I do not think that your claim that China's economy will be that much bigger than the US economy by the end of the decade is accurate.  By most accounts, the US economy at this point is still about 140% of the Chinese economy.  China will not get to the point where it is 33% bigger than the US economy in nine years.

Even if China does, I do not believe the yuan will become the world's main reserve currency.  Much of what people look for in a reserve currency is stability.  China's governmental system, among other things, makes it somewhat less likely that people will have enough faith in the stability of the yuan to accept it as the reserve currency for the world.  China's closed economic system also will make this difficult as China does not really allow their currency to be traded freely.  Therefore, I do not see the yuan becoming the world's reserve currency any time soon.

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