THE RISE OF THE CHINESE YUAN AS THE WORLD'S RESERVE CURRENCY
Matijević, Andrea. 2022. The Rise of the Chinese Yuan as the World's Reserve Currency. Belgrade: Institute for Political Studies. ISBN 978-86-7419-359-4
The global financial crisis has confirmed the role of the dollar as the currency on which the global financial system is based. The increased investment of foreigners in dollar-denominated securities during the crisis has allowed the dollar to maintain its position as the key world currency. However, the inherent instability of this dollar-based system continues to stimulate proposals for the reform of this international financial architecture. Therefore, the euro and the yuan are increasingly seen as alternatives to the dollar at the global level, given the economic performance of the Eurozone and China, as well as China's apparent intention to internationalize the yuan.
The subject of this monograph is to establish the assumptions that make the observation of the yuan as a world reserve currency increasingly justified. Therefore, the aim is to offer a synthesis that includes not only an overview of the current role of the yuan in the international financial system, but also an analysis of the process of internationalization, as well as the shortcomings and additional conditions that China needs to meet in order for the yuan to have the status of a world reserve currency, all with the aim of presenting an argument for the understanding according to which it is justified to consider that the yuan will be a serious rival to the dollar in terms of the status of the dominant world reserve currency in the years to come.
With the title of the monograph, the author seeks to highlight the hypothesis that this research aims to prove, which is that the process of internationalization of the yuan has a growing trend. For this purpose, the monograph initially starts from theoretical considerations about the world reserve currency. It will be emphasized that the function of a world reserve currency is one of the functions of a currency that enjoys the status of a world currency in general, and other functions that a world currency can have will be analyzed, along with the definition of the term world reserve currency. It will also analyze the assumptions that a currency must meet in order to have the status of a world currency, i.e. the factors that influence the international status of a currency. As part of the theoretical considerations, the analysis will also include the advantages and disadvantages of the international status of a currency, i.e. the advantages and disadvantages for the country issuing such a currency. The theoretical considerations will conclude with the fact that none of these attributes is eternal, but quite the opposite: each of the advantages of a particular currency is subject to reduction under the influence of the passage of time. No currency has ever enjoyed eternal dominance in international use.
