The Replacement of USD Denominated Reserves with Chinese Renminbi Reserves
In yet another sign that the multilateral thesis presented here is accurate and unfolding as planned the European Central Bank announced the switch of USD denominated reserves into Chinese renminbi denominated reserves. The initial re-allocation of reserves is in the amount of 500 million euros and will represent the first of many re-allocations as trade between the EU and China expands with the implementation of the Silk Road initiative and development of the Eurasian Union.
The re-balancing of global liquidity between the USD and RMB is in the early stages but will increase in frequency and volume in the coming months and years. The current composition of the EU foreign exchange reserves are in USD, Yen, gold, SDR and now RMB. We should expect that further re-allocations will take place with the RMB and eventually SDR replacing the traditional USD reserves.