Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Central banks will accelerate rise of China's yuan, global survey shows

EconomyJul 21, 2021 12:06PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: Chinese 100 yuan banknotes are seen in a counting machine while a clerk counts them at a branch of a commercial bank in Beijing, China, March 30, 2016. REUTERS/Kim Kyung-Hoon 2/2

By Marc Jones

LONDON (Reuters) -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 on Wednesday.

The Global Public Investor survey, published annually by the London-based OMFIF think tank, showed 30% of central banks plan to increase yuan holdings over the next 12-24 months, compared with just 10% 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% of central banks now thought monetary policy was having excessive influence on financial markets, although only 40% thought these policies needed to be actively reconsidered.

In stark contrast to the yuan, 20% of central banks plan to reduce their holdings of the U.S. dollar over the next 12-24 months and 18% plan to reduce their euro holdings.

Some 14% 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% of central banks would be willing to use more than 30% of their reserves in the event of a serious currency shock, while 45% of pension funds now invested in gold, well up from 30% 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. Central bank reserves alone rose $1.3 trillion last year to new high of $15.3 trillion.

The report also showed the dramatic impact COVID-19 and the lower-for-longer interest rate outlook was having.

Trends in diversification – to boost or maintain returns, or to incorporate a more sustainable investment approach – are accelerating.

SUSTAINABILITY

In their search for yield, close to 30% of global public investors - central banks, sovereign wealth funds and public pension funds - will reduce their exposure to developed market sovereign bonds, while more than 20% plan to buy more emerging market government debt.

Just over a quarter of central banks also plan to expand their corporate bond holdings and 21% will increase their allocations towards equities.

It is likely to add to the concerns the central banks themselves have that experimental monetary policy, such as negative interest rates and mass stimulus programmes, are exerting excessive influence on financial markets.

"The way central banks are intervening in the market produces substantial changes to the prices of some assets and can lead to financial bubbles," one unidentified central bank respondent cited in the report said.

GPIs are also increasing demand for sustainable assets and becoming more active investors. Some 92% of central banks invest in green bonds and 21% already in sustainable equities. Around 65% of central banks plan to add to their green bond holdings, up from 45% last year.

One in 10 central banks also said that sustainability was now their joint-most important institutional priority, although 50% still did not explicitly implement environmental, social and governance considerations in their portfolios.

"There has definitely been an acceleration (towards ESG) due to COVID," OMFIF's Chief Economist Danae Kyriakopoulou told Reuters.

"At the beginning (of the pandemic), we thought there would be a focus on the short-term, the quick boosts to recoveries. But actually there has been this realisation that our financial systems are so vulnerable to things outside the financial world"

Central banks will accelerate rise of China's yuan, global survey shows
 

Related Articles

Top 5 Things to Watch in Markets in the Week Ahead
Top 5 Things to Watch in Markets in the Week Ahead By Investing.com - Sep 19, 2021 8

By Noreen Burke Investing.com -- The Federal Reserve meeting will be the highlight of the coming week and while no change is expected officials are likely to hint that they are...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
TL Chan
TL Chan Jul 21, 2021 5:38PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Just adjustment due to the launch of Digital yuan. When CCP gdp shrink, yuan holding will drop very soon afterwards.
David David
David9 Jul 21, 2021 5:38PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China's GDP is expected to be 3 times the size of the US in the next 10 to 15 years....
Nordin Mohamad
Nordin Mohamad Jul 21, 2021 5:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
soon yuan is going to the roof as more global investment is exiting china...
David David
David9 Jul 21, 2021 5:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
How is Global investments exiting China... just last quarter, China has attracted the most foreign investments... China's market is going to be huge.... they have 600M middle class and growing... China's market is 4 times the size of the US with a huge growing middle class...
David David
David9 Jul 21, 2021 4:31PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I told you guys.... China's yuan is going to be a strong currency.... their digital currency is going to be the first at the Olympics...
Silence Dogood
Silence Dogood Jul 21, 2021 6:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
mistake..
David David
David9 Jul 21, 2021 6:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
explain...
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email