China’s move last week to set up a yuan reserve pool with four neighboring countries and Chile at the Bank for International Settlements is seen as a latest step towards erecting a system that helps reduce the US dollar’s global dominance.
Analysts say Beijing is eager for the renminbi/yuan to play a bigger role in the Asia-Pacific because of concern about the US dollar hegemony, as well as impacts from US rate hikes to tame high inflation.
Banking authorities in China signed an agreement with the Bank for International Settlements to set up a liquidity arrangement for the Chinese currency – the renminbi/yuan – to support to other central banks during times of market fluctuations.
The People’s Bank of China (PBOC) said on Saturday the first five participants in the new set-up would include Bank Indonesia, the Central Bank of Malaysia, the Hong Kong Monetary Authority, the Monetary Authority of Singapore and the Central Bank of Chile.
Each participant will contribute a minimum of 15 billion yuan ($2.2 billion) or the US dollar equivalent, it said.
The BIS said in a separate statement that the funds could be contributed either in yuan or US dollars, and that they would be placed with the BIS, creating a reserve pool.
The People’s Bank of China said the renminbi liquidity arrangement would help meet reasonable global demand for the yuan and contribute to regional financial security, the South China Morning Post said.
• Jim Pollard with Reuters
Note: This report was expanded with further details and the headline amended on June 28, 2022.