Yuan to Be the World’s 5th Reserve Currency?

[pitham1]

Another trigger for the USD's decline. 

http://www.marketwatch.com/story/chinas-yuan-may-join-elite-money-club-this-year-2015-03-25

China’s yuan may join elite money club this year

In what would be a huge milestone in China’s emergence as a major world financial power, the International Monetary Fund looks likely to adopt the country’s currency into the basket that makes up its global forex benchmark.

Or so say strategists at Bank of America Merrill Lynch, writing in a note Wednesday that they believe the IMF will vote this October to include the yuan as one of the units that make up the Fund’s “Special Drawing Rights” (SDR), a sort of meta-currency used in IMF transactions.

This might not seem like a big deal, but Merrill Lynch assures that it is. By joining the elite club — there are only four currencies in the basket right now: the U.S. dollar, the euro, the British pound  and the Japanese yen — it would “legitimize its use as a reserve currency,” possibly reducing China’s cost of foreign borrowing and offering an “extra degree of freedom in financing future current-account deficits,” the strategists said.

[countryfree]

There are still very few people outside China having yuans in their wallet. I don't see this changing before years.

[dzambodzetem]

There are still very few people outside China having yuans in their wallet. I don't see this changing before years.

To be reserve currency Yuan doesn't need to be in peoples wallets. Reserve currency is about governments keeping significant quantities of currency as part of their foreign exchange reserves.
From Wikipedia:
 "People who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than people in other nations because they don't need to exchange their currency to do so."

But there is a question of Chinese government maintains capital controls on the conversion of its currency
Wikipedia source:
http://en.wikipedia.org/wiki/Reserve_currency#Chinese_yuan

[Slark]

It is true that Chinese economy is already number 1 in the world, but this is not enough for Yuan to be seen as top world currency. How can everyone can trust in yuan when even chinese government are not taking this matter seriously, and they could have change regulations long time ago to make you an even stronger as reserve currency but instead they prefered dollars.

[OrientA]

China does nothave the military power to make Yuan reserve currency

[aso118]

There are still very few people outside China having yuans in their wallet. I don't see this changing before years.

As long as central banks hold CNY as a reserve currency, it will be good enough.
This move might cause a change.

[Bytty]

Competition for reserve currencies is growing, hope we see bitcoin there some day.

[tabnloz]

Another trigger for the USD's decline. 

http://www.marketwatch.com/story/chinas-yuan-may-join-elite-money-club-this-year-2015-03-25

China’s yuan may join elite money club this year

In what would be a huge milestone in China’s emergence as a major world financial power, the International Monetary Fund looks likely to adopt the country’s currency into the basket that makes up its global forex benchmark.

Or so say strategists at Bank of America Merrill Lynch, writing in a note Wednesday that they believe the IMF will vote this October to include the yuan as one of the units that make up the Fund’s “Special Drawing Rights” (SDR), a sort of meta-currency used in IMF transactions.

This might not seem like a big deal, but Merrill Lynch assures that it is. By joining the elite club — there are only four currencies in the basket right now: the U.S. dollar, the euro, the British pound  and the Japanese yen — it would “legitimize its use as a reserve currency,” possibly reducing China’s cost of foreign borrowing and offering an “extra degree of freedom in financing future current-account deficits,” the strategists said.

That's certainly one school of thought. I think you'll see the Yuan included with a larger weighting (in the basket) given to gold. SDR's will be the 'new' reserve-reserve anyway.

[Coinshot]

It is true that Chinese economy is already number 1 in the world, but this is not enough for Yuan to be seen as top world currency. How can everyone can trust in yuan when even chinese government are not taking this matter seriously, and they could have change regulations long time ago to make you an even stronger as reserve currency but instead they prefered dollars.

They are stuck. They have to prop up the dollar as it is the very basis of their export driven economy and otherwise all their reserves would become useless. So they are forced to buy even more dollars and in effect are paying for USA's lifestyle.

Its a cycle and I dont see it beng broken, and due to this USD will be better than CNY as a reserve currency.

[galbros]

The Yuan is still not freely convertible yet, so I don't think so. 

I disagree about military power and it certainly has the economic power but it is not willing to give up the control necessary (yet) to have their currency become a reserve currency.

[Meuh6879]

Yuan is a damn more good currency than the USD ...
and ... China don't make war, it's astonishing.

[pitham1]

Yuan is a damn more good currency than the USD ...
and ... China don't make war, it's astonishing.

China is perceived to be a bully in its neighborhood.
It has border disputes with all its neighbors, not to mention its position on Taiwan.
But the more fundamental problem is with Yuan's convertibility.

[Bitcoiner7788]

I think that if China is going to put yuan as a reserve currency, then why we do not propose BTC as a reserve currency? (just kidding)

BTW if many years later bitcoin is a reserve currency then everyone can laugh at this

[biggerbig]

Sure, it could be treated as such. If such small and IMO insignificant currency as yen can be one, why not yuan?
Let me remind you that it is used by 10 times more people than yen.

yen insignificant? I don't know where You live but I'm certain that You have something from Japanese manufacturer in Your house. TV, phone, car maybe, Japanese companies are known world wide.

From Wikipedia:
"The economy of Japan is the third largest in the world by nominal GDP, the fourth largest by purchasing power parity and is the world's second largest developed economy. According to the International Monetary Fund, the country's per capita GDP (PPP) was at $36,899 or the 22nd highest in 2013"

Yen insignificant? Yeah right...

[biggerbig]

Of course I have stuff from Japan at home, I also have a lot from Malaysia Taiwan and of course China. I'm not saying that Japan is insignificant, but if their currency can be treated as world reserve why not yuan?

It's about how strong the economy of certain country is, its about how stable the economy is, and of course its about how significant the economy is (The economy of Japan is the third largest in the world by nominal GDP).

As for yuan, as long as the Chinese government maintains capital controls on the conversion of its currency it cannot be used as a reserve currency
http://en.wikipedia.org/wiki/Reserve_currency#Chinese_yuan

[countryfree]

The question is more political than economical. Many countries don't want China to be more powerful than it already is.

[tokeweed]

The question is more political than economical. Many countries don't want China to be more powerful than it already is.

Ooooh but they will.

[biggerbig]

Chinese are pushing to make yuan reserve currency so I wouldn't be surprised to see this happening in the next 10-15 years. Yes there is a lot of controversy around Yuan but Chinese economy is growing every year in a vast way

[tokeweed]

Chinese are pushing to make yuan reserve currency so I wouldn't be surprised to see this happening in the next 10-15 years. Yes there is a lot of controversy around Yuan but Chinese economy is growing every year in a vast way

And also keep in mind China holds billions worth of US treasury bonds and notes.  And soon... bitcoin.

[innocent93]

I think there is big resistance against my country in the west. That is not to insult but I think there is fear because of how everyone in China seems to think the same. This is dangerous because of how focused we can be.