Becoming the world’s reserve currency would be an important feather in China’s cap — but the U.S. dollar has resisted being pushed aside. Credit: Bruce Detorres, photo by Brent Lewin
NEW DELHI – When the billionaire investor Ray Dalio recently predicted that the Chinese renminbi will become a global reserve currency, the world took notice. It’s a prediction that the Chinese government has encouraged through its own efforts. The question now is whether the coming “Year of the Ox” will bring the decisive shifts needed to position the RMB to fulfill policymakers’ ambition.
Like a beauty pageant, the contest for reserve-currency status is one of relative attractiveness. International traders and investors must decide which among the currencies available to them is most convenient to use, is supported by the strongest financial system, and — perhaps most important — enjoys the backing of a trustworthy sovereign. What is new today is that both of the world’s major sovereigns also seem to be competing to reduce their own trustworthiness.
Relative attractiveness is difficult to quantify. But underlying this concept is one factor that can be measured p
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