Instituto Confucio UC

RMB first ever added into ECB’s foreign-exchange reserves

Thanks to the accelerated pace of China's currency RMB, or the yuan, towards internationalization as well as the good performance of Chinese economy, RMB is increasingly attractive to the central banks around the world, said analysts after the European Central Bank (ECB) announced to shift 500 million euros worth of its foreign reserves to RMB during the first half of 2017.

By Wu Gang from People’s Daily

The decision is the first time for the ECB to add the Chinese currency to its reserves.

“The incorporation of the RMB into its foreign reserves reveals an increasingly rising importance of China to the whole Eurozone,” the bank said.

The International Monetary Fund (IMF) decided to include the RMB into the Special Drawing Right (SDR) basket as a fifth currency, effective on October 1, 2016. The other four club members included the US dollar, the euro, the yen and the British pound.

“As the world’s second largest economy, China, in recent years, has been deepening its reforms in currency and financial systems, and it has been much more involved in the global economy, Matthias Busse, research fellow at the Brussels-based Centre for European Policy Studies told the People’s Daily.

This proves that the internationalization of Chinese currency and its economy has been recognized by ECB, he said.

The decision of the ECB, as one of the most influential central banks in the world, will have a certain demonstration effect, said Busse, adding that more financial institutions may select RMB as an option for asset allocation in the future.

The global demand for RMB is destined to see a gradual growth, the researcher added.

Analysts also pointed out that ECB’s decision was made after comprehensive analysis of the present situation, as China has nowadays become the second largest trading partner of the EU.

In addition, China-EU investment has been maintaining a continued growth as a whole, and China has first ever become a net direct investment country to EU.

RMB’s inclusion is attributed to the eye-catching development of Chinese economy in recent years compared with developed economies who were trapped in the financial crisis, noted Zsolt Darvas, senior fellow at the Belgium-based think tank Bruegel Institute of Economics.

As a matter of fact, the EU, especially Eurozone countries, all expect to strengthen economic and trade relations with China, Darvas said.