Could China's Currency Be The New World Reserve? | Economics Explained

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When I lived in China I spent over 15 hours talking to 5 (!!!) banks just to open an account which was a domestic only account that couldn't even receive foreign funds. The idea that they can be the world's reserve currency is laughable when their system is so hostile to foreigners.

I love telling this story. I was backpacking in a very rural region of Nicaragua, a country with horrible relations to the USA. I was going down this country road and hadn't seen a human being in an hour.. Finally I come to this small stand, and was able to buy a Coke using a $1 US dollar... and the teenager working at the stand was able to give me the correct change in the local currency. Not only was she selling coke and accepted a dollar, but she knew the conversion rate accurately enough to give the correct change.

One of the main reasons USD is so widespread in the world is oil. OPEC only accepts USD, and that's a huge reason. Another thing this video didn't mention is that as a reserve currency if there is inflation happened in the US, the US government can simply print more USD and let all other countries pay the price.

Even the people inside China prefers to hold USD as a "store of value" over the Yuan. Chinese people also prefer USD over Yuan when they need to move capital out of China. When the people inside the country don't even believe in the Yuan, it is difficult to see the Yuan can be any challenge to the USD.

Most important point: outside sources (ex foreign banks and countries) can’t trust China’s internal financial records vs. the US or EU, hence the reluctance even think about leaving the dollar.

As an American my second choice of currency would probably be the Euro. I'd take a range of currencies before I would take Chinese yuan

Videos like yours have gotten me into global economics and I want to say how much I appreciate it. These topics are extremely complicated, but the visual aid really helps explain most of the concepts in the best way possible.

I'm sorry to say that, but that's totally out of question. Considering what's recently been going on in China, multiple companies and major banks come crashing down really fast. It's a frightening situation and the economy will have a hard time coming back from this one. If the Chinese themselves don't trust their government handling the money, how could the rest of the world even consider it?

No. Because every time they try to internationalize it, people try to get their money out of country as soon as possible. I see more stringent capital controls in Chinas future, not world reserve currency status; which is the exact opposite of what a nation with world reserve currency ambitions requires

They have to figure out their banking right now that’s getting worse everyday that resulted in mass rallies this year

Show me a man without investment and I'll tell you how long it takes to go bankrupt.

It blows my mind how economist and business men ever trusted a place like China to be the worlds manufacturing center. India, Japan, America itself, Brazil... So many other and better choices. More trustworthy too.

The way you explain stuff makes it very easy to understand. I always feel like i am learning something new. Great video as usual.

Given the lack of transparency and rampant corruption in the PRC adopting the RMB as a global currency would be suicidal for financial institutions in the long run

Spot on. While China would love to have their currency as the world reserve currency, their own actions and manipulations make that impossible. Most of the world just don't trust them, and trust is the biggest factor to any fiat currency to being viable.

the quality and content of your videos improve with every release. I've been following you since the early days when you used to use a lot of stock footage that would regularly show some different country or place that you were describing. But the potential was always there. Awesome to see you achieve such success. Well deserved! Greetings from Nevada USA

EE: "China is now the world's largest economy" Evergrand and the general Chinese real state: "Yeah.. hold our beer"

I highly doubt the currency of a country run by a highly authoritarian, closed-off, mercantilist government can ever become a reserve currency. You need trust above all else, and the CCP has time and again demonstrated that it should never be trusted. On the opposite end of the spectrum, trust is the most valuable commodity that Switzerland and the UK have, which explains their outsized role in financial markets (something you've mentioned in your own videos), and why many are perfectly happy with holding British Pounds or Swiss Francs as reserves despite being backed by much smaller economies.

Great post my friend. I always enjoy tuning into your newest post.