LONDON, The United Kingdom – Bank of England President Mark Carney revealed that the Chinese yuan could become a reserve currency in the future and replace the US dollar as the global reserve currency.
According to him, the Chinese yuan may potentially become a global reserve currency along with the US dollar, however, these changes tend to be more much slower than the changes in the size of the economies of the two countries.
“As the world re-orders, this disconnect between the real and financial is likely to reduce, and in the process other reserve currencies may emerge,” Carney said on January 9 during an online forum hosted by the Bank of England, as quoted by Reuters.
“In the first instance, I would expect these will be existing national currencies, such as the RMB,” Carney added, referring to the abbreviation of the Chinese currency.
The US dollar remains the most widely used currency in the world. The use of the dollar facilitates the valuation of contracts and international trade in general.
However, in recent years more and more countries are discussing the abandonment of the dollar in international transactions, while the aggressive trade policy of President Donald Trump has made the US dollar less suitable for international payments.
China has increased the yuan’s share in negotiating with major trading partners, in particular with Russia and Iran, which are under US sanctions. In addition, in March 2018 Beijing launched future oil contracts quoted in yuan. OPEC’s third largest oil producer, Iran, already sells its oil to China for yuan.
Iran however is not the only country wanting or forced to trade in local currencies. Many states against the US dollar hegemony, such as Turkey, Venezuela and Russia, are all moving towards trading in local currencies. However, even traditional US puppets such as the United Arab Emirates as moving towards de-Dollarization.