Global Central Banks Bet on China’s Recovery with Record Holdings of the Yuan

Source: Yicai Global

Holdings of the Chinese yuan as a share of global foreign exchange reserves rose to 2.5% in the first quarter, the highest level since the fourth quarter of 2016.

USDCNY is down -0.01%.

• Yuan reserves by global central banks rose by 6.7% to $287.5 billion in the first quarter from the previous one, the ninth consecutive increase.
• The rise in yuan reserves reflects growing optimism by central banks about China’s prospects, as the country continues to become attractive to overseas investors.
• Yuan’s addition to the IMF’s reserve asset of Special Drawing Rights, as well as the inclusion of state and policy bank bonds in major global indexes, have also boosted reserve holdings.
• China’s bonds and stock yields are expected to rise by between 5.5% and 7.4%, respectively, higher than those outside it at 3.9% and 5.9%, respectively.