Good news for the Chinese yuan keeps coming one after another!
The high-level meeting between China and Russia has concluded, further solidifying the position of the yuan in trade between the two countries. At the same time, there is also good news from Russia. On the Moscow Exchange, the monthly transaction amount of the yuan ranks first, becoming the most popular foreign currency, and for the first time, it has surpassed the transaction volume of the US dollar.
Last month, Iran and Saudi Arabia signed an agreement in Beijing to restore diplomatic relations. As a third party, China has also gained significant benefits. In the future, in oil trade with Iran and Saudi Arabia, the two countries will bypass the US dollar and settle in yuan.
In addition, in February, the Central Bank of Iraq announced the use of the yuan. Currently, several major oil-producing countries have successively announced that they will abandon the US dollar in the future and switch to the yuan, deepening trade relations with China.
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01. Russia abandons the US dollar
The contribution of the yuan in Russia's foreign exchange market is increasing, and it has already surpassed the US dollar. This is, of course, related to the active abandonment of the US dollar, but it is also inseparable from the continuous self-improvement of the yuan.
In the past decade, China has made significant contributions to global economic growth. Even in the face of economic downturn and severe external environment caused by the COVID-19 pandemic, China's economic development has not been suppressed. Instead, it has grown faster than most developed countries.
China's economic potential is enormous, and its economic development level is also at the forefront globally. In terms of investment potential, the yuan is worth being optimistic about.
Russian macroeconomic experts have said that the current top priority of Russia's foreign exchange market is to popularize the use of the yuan in more areas. The yuan occupies a very important position in the national currency system, and the volume of yuan trade settlement is considerable. Russia's most important and promising partner must have a place for China, and choosing the yuan will definitely be the right choice.02, Saudi Arabia and the Two Instruments Abandon the US Dollar
The renminbi can maintain a stable exchange rate, and as an international currency, it can effectively hedge risks. Even in a severe international environment with dual impacts of political and economic factors, the renminbi's exchange rate against the US dollar remains robust.
Many financial analysts have stated that the international influence of the renminbi is undoubted, and its ability to withstand external economic pressure risks is much stronger than that of other countries' currencies.
These are the most important reasons why Middle Eastern countries have begun to try to bypass the US dollar and use the renminbi for trade settlement.
In the past 50 years, since oil and the US dollar have been deeply linked, the oil trade of Middle Eastern oil-producing countries has increasingly been held hostage by the US dollar. Bypassing the US dollar to seek other currencies for pricing and settlement has become a common demand among many oil-producing countries.
Previously, Ghana has started to use gold to purchase crude oil, which is a good attempt. However, not all countries have rich gold reserves like Ghana, so finding a stable third-party currency has become a consensus. Under these circumstances, the renminbi naturally becomes a candidate.
03, China Sells Off US Treasury Bonds
The status of the US dollar is the exact opposite. Although it is still the main global payment currency, its creditworthiness is being continuously questioned.
One of the joint actions of global central banks in 2022 was to sell off US Treasury bonds together. This selling wave has continued to the present. Data from the Federal Reserve last week shows that the total amount of US Treasury bonds held by overseas officials has now decreased to 2.86 trillion, with another $76 billion sold off in just the past week.
US media acknowledge that this is the largest single-week selling record since March 2014.Coincidentally, China's selling of U.S. Treasuries also began around the same time, peaking in 2013 with the highest record of U.S. debt holdings. However, since 2014, there has been a continuous reduction, and to date, the total amount sold has exceeded 400 billion U.S. dollars.
The U.S. dollar and U.S. Treasuries are becoming increasingly unpopular.