Bundesbank board member says it will follow in footsteps of ECB but doesn’t indicate how much it will invest
PUBLISHED : Monday, 15 January, 2018, 4:15pm
UPDATED : Monday, 15 January, 2018, 11:28pm
Deutsche Bundesbank, the central bank of Germany, has decided to include the yuan in its reserves, a board member of the bank said on Monday in an endorsement of the Chinese currency’s international clout.
Bundesbank board member Andreas Dombret told the Asian Financial Forum in Hong Kong that the German central bank was following in the footsteps of the European Central Bank by diversifying part of its reserves into yuan, also known as renminbi.
“The [renminbi] is used increasingly as part of central banks’ foreign exchange reserves,” Dombret said. “For example, the European Central Bank included RMB but also other European central banks did so. And I can today say that also the German central bank has decided to include RMB in our currency reserves.”
He did not elaborate on the amount or percentage of the central bank’s planned yuan assets.
The ECB, of which Germany is a leading authority, last year invested €500 million (US$609.8 million) into yuan.
The International Monetary Fund included the yuan in its basket of special drawing rights in 2016, giving it a nominal status as an international reserve currency.
However, Beijing’s ambition of the yuan becoming an international currency suffered a setback when the Chinese government started to impose draconian curbs on capital outflows.
The German central bank’s recognition of the yuan’s “hard currency” status could offer fresh support for its value. The yuan exchange rate in both onshore and offshore markets has hit its strongest levels against the US dollar since the end of 2015, partly thanks to the weakness of the greenback.
While China is the world’s second biggest economy, its currency has a very marginal role in international use. According to the latest figures from the IMF, the share of yuan in the world’s foreign exchange reserves was 1.12 per cent in the third quarter, compared with 1.08 per cent in the previous quarter. In comparison, the US dollar accounted for 63.5 per cent of all reserves, followed by the euro at 20 per cent.
Yin Yong, deputy governor of the People’s Bank of China, was quoted by the official China Securities Journal as saying on Monday that the yuan had a long way to go before it became a global currency, and China would take a long-term strategic view of the yuan’s internationalisation.
“The international status of the yuan doesn’t match China’s weighting in the global economy,” Yin was quoted as saying. “The market also has huge demand for yuan assets.”
This article appeared in the South China Morning Post print edition as: German central bank taps into yuan