22 November 2022
Beijing has also implemented a series of other policy initiatives in recent years, including: (i) the introduction of gold and crude oil futures contracts denominated in RMB; (ii) the use of RMB for financing and trade settlement with members in the Belt and Road Initiative (BRI); and (iii) the utilisation of RMB as loans and bond issuance from the Asian Infrastructure Investment Bank (AIIB). [...] Furthermore, China’s ambition for the RMB to be included in the IMF's Special Drawing Right’s (SDR) basket was realised in 2015 when the IMF Board agreed to include the currency in the SDR basket with a weight of 10.92 per cent. [...] In May 2022, the IMF further raised the weight of the RMB to 12.28 per cent after its quinquennial review of the SDR, further underlining the importance of the RMB in the international monetary system. [...] Not surprisingly, since half of its foreign reserves were frozen by the US and its allies, Russia has reportedly contemplated a foreign exchange reserve strategy of buying as much as US$70 billion in RMB and other “friendly currencies.” Observers believe that the sanctions on Russia may lead to a gradual dilution of the dominance of the USD and the emergence of a more fragmented international mone. [...] RMB’s Future Trajectory In addition to the outcome of China’s policies since 2009, and the effects of the sanctions on Russia following its invasion of Ukraine, the sheer size of China’s economy may also render the RMB an attractive alternative to the USD.