Talking about the dollar as a reserve currency next week [2]and I noticed these interesting ways.
Figure 1: Share of FX profit in CNY (red square), in CAD (chartreuse triangle), in April. Common shares are 1.00. Source: BIS Triennial Surveys.
A similar pattern holds for central bank reserves as reported in the IMF’s COFER.
Figure 2: Share of central bank reserves in CNY (red), CAD (chartreuse). Source: IMF.
Although there has been some reduction in CNY shares since 2022, there is a problem in translating this trend. Most if not all of the reduction can be accounted for by the CNY’s decline against the USD (9% in log terms, compared to when the average fell by about 5 ppts).
However, I don’t think the CNY will become a major international currency anytime soon, as discussed here (remember, the euro accounts for 18.5 ppts of total central bank fx reserves by the end of 2023).
The place where CNY has become important for paying invoices is not surprising given China’s large role in trade. Ito and Chinn (2014) discuss this issue, but more recent estimates are provided by Georgiadis (2021).
Notes: The left panel plots the number of countries with data on renminbi invoices. The right panel shows the share of exports and imports invoiced in renminbi, with the median (thick lines) and the 75th percentile (thin lines).
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