China has one of the largest economies in the world, however its currency has not been treated accordingly in the past. However, the European Central Bank has just made an announcement that reverses this trend. The ECB is seriously considering the addition of the Yuan to its currency reserves which is currently made up of the US dollar, the Euro, the Pound, and the Yen. Currently the Yuan is not a widely held currency around the world, but this announcement shows that slowly the Yuan is becoming more internationalized.
This announcement highlights a general trend of liberalization in the Chinese financial system. The president of San Francisco’s federal reserve bank, John Williams, said “After 35 years of amazing growth it’s a natural and healthy next stage for China’s development to liberalize capital markets, to liberalize internal financial systems, and obviously the Renminbi internationalization is an integral part of that.” The prospect of the ECB holding the Yuan in its reserves is a big step for China and shows a promising future for the Chinese financial system and the possibility of the Yuan being openly traded in all parts of the world.
Reicher, Stefan, Belinda Cao, and Jeff Kearns. “China Welcomes ECB Yuan Debate in Internationalizion Push.” Bloomberg.com. Bloomberg, 11 Oct. 2014. Web. 15 Oct. 2014.