The Chinese yuan is on course to become a much more influential part of the global financial system with almost a third of central banks planning to add the currency to their reserve assets, a closely followed survey showed yesterday, according to Reuters. The Global Public Investor survey, published annually by the London- based OMFIF think tank, showed 30 per cent of central banks plan to increase yuan holdings over the next 12-24 months, compared with just 10 per cent last year.
It comes despite the differences between Western governments and China on the global stage. The yuan’s rise will almost certainly be a global trend, but may be especially strong in Africa where almost half of central banks are planning to increase their yuan reserves. Other eye-catching findings showed that 75 per cent of central banks now thought monetary policy was having excessive influence on financial markets, although only 40 per cent thought these policies needed to be actively reconsidered.
In stark contrast to the yuan, 20 per cent of central banks plan to reduce their holdings of the U.S. dollar over the next 12-24 months and 18 per cent plan to reduce their euro holdings. Some 14 per cent also want to cut their holdings of euro zone sovereign debt in what could be interpreted as a response to the European Central Bank’s deeply negative interest rates. The report also showed that only 59 per cent of central banks would be willing to use more than 30 per cent of their reserves in the event of a serious currency shock, while 45 per cent of pension funds now invested in gold, well up from 30 per cent in last year’s survey. It estimated that central banks, sovereign wealth funds and public pension funds control a record $42.7 trillion worth of assets.