Renminbi Demand Is About to Explode

Economics, Premium POM37 Comments

And What This Means for the Price of Gold

By JC Collins

Two interesting things happened over the last few days.  The Chinese yuan experienced a single increase over one night which equates to the largest appreciation in a decade.  This was paralleled by a 5% decrease in the price of gold.  A depreciation which is continuing as I type.  The interesting thing about economics is that you can spin data and numbers any which way to support a given theory or sales pitch.  So I’m not suggesting that the above two events are directly connected through a process of cause and effect.

With that being said, I have suggested in previous posts over the last few years that reserve currency diversification will put additional downward pressure on the price of gold.  As USD denominated securities are exchanged and substituted for euro and yuan denominated reserves, the demand for dollar alternatives becomes a reality, and the amount of gold investment will decrease.

This has been an extremely challenging aspect of the multilateral transition for many precious metals investors to grasp, and one I’ve attempted to promote without ruffling too many feathers.  Though I have at times.  Confidence in this position does not equate to arrogance on my part, though I understand why some would interpret my matter-of-fact writing in such a manner.

One of the positions which many analysts have adopted over the years is that there are no alternatives to the USD, and as such gold will be the big winner in the event that the dollar experiences a depreciation, or outright collapse into hyper-inflation.

But this position does not consider the multilateral monetary framework which is being developed behind the scenes.  This is a framework which will provide alternatives to the USD and allow for a re-balancing of the international monetary system.  A re-balancing which will work towards removing the threat of systemic collapse and financial volatility.

The announcement of the inclusion of the Renminbi in the SDR basket composition is imminent and should take place in a matter of days, or a few weeks.  Though there has been speculation that the effective date of the new SDR will not take place until next October, which would buy the United States one additional year of deficit budget funding before the crunch of dollar depreciation and interest rate increases.  This could change as the announcement of the new basket takes place.

There are multiple paths forward on this SDR transition.  The RMB could be added directly into the main SDR composition at full value, or it could be added at a sliding scale type model where the weight of the RMB in the SDR increases over the next 5 years.  This weighting increase would correspond with further capital account liberalization of the yuan, which would lead up to full convertibility by the year 2020, at which time the full weighting of the RMB in the SDR would be realized.

The other possibility, though one which is less likely, is that the RMB will be constituted into its own SDR2 composition which will serve the same purpose, but remain isolated from the machinations of the main SDR basket. (This would benefit the US and allow for additional time for the unwinding of USD denominated reserves.) A similar process of sliding scale weighting increases could take place, with the consolidation of both SDR1 and SDR 2 during the IMF review in 2020.

We will know soon enough which path forward the International Monetary Fund and China will take.

Either way, what is clear is that demand for the Renminbi will increase dramatically after it is officially sanctioned by the IMF, whether it’s SDR1 or SDR2.

In fact, there could be $500 billion in RMB reserve demand once the announcement is made.  This accumulation of RMB denominated reserves will begin the process of mass diversification away from the USD denominated reserves.  It is important to remember that the USD will still remain as a viable reserve asset, and will remain as such amongst the other top reserve assets, the euro and RMB.

The large increase in the yuan the other day corresponds with the anticipation of the SDR announcement, as well as a trial program in the Shanghai Free Trade Zone which will allow for domestic buyers to purchase foreign assets.  The PBoC has also stated that it will be looking at additional methods of implementing looser capital controls.

What is slowly emerging throughout the international monetary framework is that a stronger renminbi is becoming a political priority.  Even the US understands the importance of diversifying the foreign exchange reserves and allowing the dollar to weaken against the currencies of its trading partners.

This depreciation of the USD will correspond with the beginning of monetary policy normalization.  The likelihood of the Fed increasing interest rates in December is improving.  As I’ve stated continuously, this is exactly what the US wants.  Domestic jobs will increase with the increase of American exports.  In turn, the debt-to-GDP ratio comes down and America will be able to look at more sustainable fiscal budgets in the years to come.

Trump and his mantra of making America great again falls exactly in line with the multilateral monetary transition which I have been describing for almost two years now.  On top of what I’ve already stated, Trump is now coming out saying that Janet Yellen has not raised interest rates because Obama told her not too.  Apparently Obama doesn’t want to see the bubble burst under his watch.

But like the political pressure is building for a stronger renminbi, there is an equal amount of pressure building for an increase in interest rates.  Policy normalization is being promoting by everyone from the BIS, IMF, to regional and central banks.  Even the emerging markets themselves are starting to get on the rate increase bandwagon and stating that the Fed should just get on with it.

The unwinding of this debt bubble, and USD reserves, will cause some initial volatility and not all corporations and investment vehicles will survive the transition.  The availability of a strong dollar alternative will mean that capital flows from the USD to the RMB will take place.  The expected rush into gold which many have predicted as the dollar depreciates will not likely materialize as expected.

This does not mean that gold will collapse in value, but it could very well settle around the $800.00/oz range for a few years.  There could be some gold appreciation realized on the upward swing towards the year 2020.  But it’s hard to predict at this point.

What is clear is that massive reserve diversification is starting to take place, and the rise of an alternative to the USD will mean less opportunity for gold.  Renminbi demand is about to explode, and the demand for gold will suffer in the interim.  - JC

37 Comments on “Renminbi Demand Is About to Explode”

  1. Hi JC

    I understand your position with regard to gold, but find the reasoning weak. Gold for now trades via U.S. $ and if the dollar declines than historically commodities would increase in price. (I'm leaving aside that many feel gold is money and not a commodity.) In addition, China has been a major buyer of gold ( and is also the worlds largest miner) so I doubt it is there intention to cheapen their shiny friend, at least long term.

    As for policy normalization, the IMF and BIS have warned the Fed against raising rates this year prior to each meeting, so I guess I am more doubtful of them raising in December; especially given the weakening economy.

    Anyway, keep up the interesting thoughts and the next 6-months should get interesting regardless of the price of gold.



    1. Steve, I thought value was determined by supply and demand. Basic economics. I could be mistaken.

      In regards to the other items, I would suggest a thorough reading of the material which Dane and Alan have linked in the comments sections of the last few articles. These matters are way more complex than most analysis would suggest. As usual, I stand with my analysis.

      And yes, the next six months are going to be more interesting than the last six. But the multilateral trend will continue.

      1. In the long term you are correct, price is determined by supply and demand. However, I'm sure you're not naïve in beleiving that in the short-term the scale can't be fiddled with. This is not a conspiracy nut excuse as one simply has to review the list of evidence that's been laid before us regarding bank manipulation of mortgages, foreign currencies, Libor, energy, etc. while central banks minipulate interest rates. Does anyone truly believe that golds price isn't poked and prodded? (Volcker pointed out golds special place on central banks radar screen decades ago.)

        If true supply- demand were working than golds price would be higher in my opinion, as the bullion demand from Asia has been high over last couple years.

        And just as central banks have been working behind the scenes on the SDR, they have also been repositioning their gold holdings.

        So maybe your analysis proves correct and the dollar falls alongside gold in the years ahead. These days anything seems possible, but I can't see how gold loses value compared to the fiat currency choices that the central banks are so busy devaluing.

        1. So we are agreed on supply and demand. Unfortunately it is human nature to try and work things for our own selfish benefit. Nothing new there and it applies to most, regardless of socioeconomic position. Some assumed manipulations are misunderstood machinations of how the system works. Such as central bank interest rate manipulations. That is in fact the mandate of most central banks. No conspiracy there. I understand your position Steve, and appreciate that you like to use this forum to counter what you admittedly agree is a probable outcome. Playing the devils advocate is always important. Keep in mind that while some currency is depreciating, others are appreciating. The value of commodities, and even gold, like real estate and other investments, will fluctuate with supply and demand. The exchange rate of one currency against another is a measure of the value of commodities, and gold, between those two currencies. The expected rush into gold as the dollar depreciates was based on a lack of dollar alternatives. That argument is a supply and demand argument. With the RMB offering a viable alternative, which will appreciate, the demand for gold will be less. Once again, supply and demand. You can't use supply and demand to support your own position and then say my reasoning of supply and demand is weak. Outside of being interesting, this next 6 months are also going to be difficult for many to digest. But not for the reasons that they expect.


          There Are Now 293 Ounces Of Paper Gold For Every Ounce Of Physical As Comex Registered Gold Hits New Low

          I am really trying not to be a doom and gloomer, but when I see articles like the above, how can one not conclude that the price of gold is completely manipulated. Perhaps it is all way above my head, but when the paper ounces are so out of touch with the physical, my pee brain just can't see how it could be based on simple supply and demand. To be clear, I am not hoarding gold coins in preparation for the zombie Apocalypse. I am just trying to make sense of it all, and nothing seems to add up.

          On another front, I am all for a transition away from US dominance, particularly for the USD petro dollar to die, and the USD to be on a more level playing field. Makes complete sense why the strong USD is killing manufacturing jobs in the US and turned the country basically into a "service" based economy as we really produce very little these days. However, all these conversations about a transition or even the doomers, seem to never address the massive derivative situation. I've read that of the total derivatives out there, 25% - 40% are interest rate derivatives. If even the major banks real assets compared to their derivatives positions, then it would seem to suggest that a hike in interest rates would mean that there are going to a very large number of calls that cannot possibly be covered. While I agree, interest rates cannot be maintained at 0% forever, I have yet to read or hear of a solution to all these outstanding instruments that Buffett called financial weapons of mass destruction, and mexican billionaire Hugo Salinas Price warned about.

          "I think we are going to see a series of bankruptcies. I think the rise in interest rates is the fatal sign which is going to ignite a derivatives crisis. This is going to bring down the derivatives system (and the financial system).

          There are (over) one quadrillion dollars of derivatives and most of them are related to interest rates. The spiking of interest rates in the United States may set that off. What is going to happen in the world is eventually we are going to come to a moment where there is going to be massive bankruptcies around the globe."

          Now perhaps he is a fear monger. I am trying in earnest to view what I am seeing in a different lens. I agree it seems obvious there is a shift taking place, and I truly hope that to complete the transition does not turn into complete turmoil because I do not have hoards of food, guns, or a bunker. But still, its difficult to dismiss the notion of a near collapse, when it almost happened in 2008 and the debt is much larger, central banks seem to be out of tricks, & the appearance of bubbles that will make the tulipomania of 1637 look like a cake walk.

          Anyways, I enjoy reading everyone's comments and various points of view - and even more the education that you would never get in a class room.

          Hope everyone is well.

          1. Shawn, there are segments of this economy, including some high risk derivatives and over extended corporations, which will be allowed to fail. That is the intent. The case is being developed for a broader multilateral based on the SDR. But there is no need to feel like the world will end. The solution is already being slowly revealed.

  2. I mostly agree with your thesis and definately see the RMB being an alternative for big money fleeing the dollar.

    However, the US dollar market is HUGE and is the most liquid on the planet. The RMB is not even close to this. Someday, it will be. But China is still in their infancy for the international market. The dollar has had 100 years. The RMB 10?

    The 10,000 pound elephants in the room that no one talks about are the derivatives (specifically, the interest rate derivatives) and sovereign bonds. There is not enough capital on the planet to absorb these 2 problems. And once things start falling, they can fall fast.

    Recently, We got a glimpse of this with the oil derivatives. Look at what happened to Deutsch bank. 8 billion in losses. These losses are commodity derivative driven.

    If they raise interest rates, we will see big cracks in the interest rate derivatives, the biggest derivative market. The RMB will not be liquid enough to absorb all of the capital flowing out of the debt laden western currencies that the SDR currently makes up.

    The RMB will be an alternative, yes, but it is just not liquid enough for the sovereign debt problems that are getting ready to go full steam and the interest rate derivatives.

    Gold and Silver will have to be an alternative. First paper and physical. Then Physical, when people realize the paper is worthless.

    There is also the Gold backed RMB simmering in the background which will be good for gold and the RMB.

    I also think the US stock market will absorb a lot of this fleeing capital. I can see the Dow going to 30,000 or 40,000 as western currencies collapse.

  3. Climate change is a big issue:
    Leaders of the IMF, World Bank and Germany's Angela Merkel call for price on carbon
    October 20, 2015
    In what has been described as an unprecedented alliance ahead of the Paris climate summit starting next month, the leaders said pricing emissions was needed to steer the global economy to a low-carbon future that would avoid dangerous levels of global warming.

    "There has never been a global movement to put a price on carbon at this level and with this degree of unison," World Bank Group president Jim Yong Kim said in a statement. "The science is clear, the economics compelling and we now see political leadership emerging to take green investment to scale at a speed commensurate with the climate challenge."

    It's just a thought that I am throwing into the mix that supports the title of this article: Renminbi Demand is about to Explode.

    Some quick research will demonstrate a sharp demand for Chinese RMB denominated Green bonds.

    Let alone Central Bank demand for RMB to achieve reserve asset quotas post SDR inclusion.

    The "attractiveness" of the SDR as a reserve asset once RMB inclusion becomes official (hehe, that's a google search query prompt for the google research hungry) is increasingly popular.

    Trigger for global shift into renminbi assets
    July 29, 2015
    "...There may be a shortage of renminbi-denominated investable assets for world central banks in coming years..."

    estimations have increased from US$100bn since the above article was printed

    1. is there a shortage of gold-denominated investable assets for world central banks in coming years?

      gold dividends Vs green bond dividends is something I have yet to research - from an investor point of view.

      (just some thoughts)

      1. @Dane perhaps Natural Gas versus Oil (fossil fuels?) comes into this picture RE climate change policies... (again, just some thoughts 🙂 )

        1. We can keep an eye on that one Alan. I'm on board with your thinking and its really exciting sniffing out the possibilities.

          The only weakness that keeps poking me in the side is the existing infrastructure. Perhaps that's poor wording. My intent is that wherever the energy meets the pavement. Will liquid natural gas work in existing automobiles? Thats a huge switch to accomplish in changing over to natural gas.

          That being said it has begun with the big rigs and with LNG stations growing and so many people locked into the leasing cycle LNG probably could be phased in but man what a monumental task.

          In fact "Consumer Energy Center" reports that a LNG gas station costs about a $1 million US to build.

          They also say,

          "What vehicle/niche markets use LNG?
          Because of LNG's increased driving range, it is used in heavy-duty vehicles, typically vehicles that are classified as "Class 8" (33,000 - 80,000 pounds, gross vehicle weight).

          Typical transportation applications are refuse haulers, local delivery (grocery trucks), and transit buses."

          But lets not forget that the US needs to increase exports and they have been looking at or actually increasing their LNG export capabilities which leads right into this article.

          Greenhouse gas emissions up to 194% higher from coal than U.S. LNG"

          More on exporting of LNG.

          1. @Dane you've provided me some thought provoking points with some really good links.

            Taking that onboard and maintaining the theme of JC's article [Renminbi demand is about to Explode] let's see if we can make the case for Natural Gas investment as being one source [of many] for increasing Renminbi demand:

            Let's start a google search query with low-carbon future.

            The first search results page reveals several key elements:

            Report: China heads to low-carbon future
            October 16th, 2015

            Natural Gas Crucial to Low-Carbon Future, Say ExxonMobil, Shell CEOs
            October 8, 2015

            Designers from China, US commit to low-carbon future
            2 Nov 2015

            Now we've determined that Natural Gas looks to be quite a sound element of China's energy profile. Let's look further:

            FIVE YEAR PLAN
            "...China’s 12th Five-Year Plan (2011-2015) promotes natural gas as a clean energy source and prioritises Sino Gas’ PSCs for accelerated development..."
            "...The 13th Five Year Plan is expected to be approved in March 2015. The Draft 13th Five Year Plan continues to keep the development of natural gas as a priority within country’s energy planning..."

            So, here we find Natural Gas as a key policy of the Chinese Government. Time to visit the National Bureau of Asian Research:

            China’s Coming Decade of Natural Gas?
            MAIN ARGUMENT
            Through 2020, China intends to undertake profound shifts in its energy profile. As part of this process, natural gas stands to benefit as the country seeks to move toward a cleaner energy mix and shift away from coal. Yet as the government continues to encourage the use of gas, the potential scale of China’s demand may be beyond expectations. At the same time, it appears that domestic gas production will be insufficient and that the country’s much‑heralded unconventional gas development will not be easily achieved over the next five to ten years. These broad dynamics bode well for significant increases in gas imports in the interim, particularly of LNG. Given the scale of China’s energy demand, the growing appetite for gas will have profound effects on both gas markets and geopolitics more generally..."
            "...China’s dependence on natural gas imports could easily reach 50% over the next five to ten years..."
            "...natural gas stands to gain an increasing share in China’s energy mix. This resource is attractive to China for many of the same reasons that it is attractive to the United States..."

            Ok, so some heavy reading and research along these lines can easily cement the fact that Natural Gas has a place in our immediate future and China's. So how can we determine if it stands to increase demand for Chinese Renminbi?

            Let's head over to Zerohedge for a quick sound byte:

            PetroYuan Proliferation: Russia, China To Settle "Holy Grail" Pipeline Sales In Renminbi
            "...Now, it appears Russia and China will de-dollarize natural gas settlements as well..."
            "...In other words, once both routes are up and running, some 68 bcm/y in natural gas exports from Russia to China will be settled in yuan amounting to hundreds of billions in renminbi settled trade over the life of the deals..."

            This is getting to be a long post, so I'll leave it there. But RMB-denominated Energy transactions along with RMB-denominated loans from The Silk Road fund along with Central bank demand for RMB to meet required reserves and we start to see that just those few fundamentals out of many more easily support the PoM thesis and this article.

            @Rodriguez this is all your fault. Haha! you brought up the whole Natural Gas query in the first place mate 🙂

          2. HKEx chief sees bright, connected future ahead
            November 5, 2015
            "...Q: This month, the International Monetary Fund will decide whether to include the yuan in its benchmark Special Drawing Rights currency basket. How would the internationalization of the Chinese currency impact HKEx's business?

            A: The internationalization of the yuan will have a huge long-term impact on HKEx's business and, in fact, globally. When the SDR inclusion happens, a lot of central banks will have a mandate to hold yuan, and there will be a lot of sovereign bonds [involved in] that. So the liquidity of the yuan [will] potentially become so much more than we dreamed a few years ago..."

    2. Excellent line of thought Alan.

      Carbon emission trading.

      When a country develops it naturally creates more carbon thus developing countries that could trade carbon emissions before shouldn't be able to going forward. This leaves carbon heavy countries looking for alternatives...

      The result could be interesting emerging technologies. Carnegie's wave technology is interesting. I think Google is working on some sort of wave energy system also. I'll keep looking.

  4. I picked up on the term "big money":

    China Has More Billionaires than US
    November 02, 2015
    "...The number of Chinese billionaires has increased by almost 70 percent in the past year, according to figures in the 2015 “Hurun Rich List,” an annual report released by the Hurun Research Institute.

    Last year’s report indicated that China had 354 billionaires. This year’s report found there are now 596 Chinese billionaires.

    China has now surpassed the United States in number of billionaires..."

    1. Boy this seems to really be trending Alan.

      I got a wild thought to search for "List of countries by the number of US dollar billionaires"

      What happens if the Chinese USD billionaires exchange their USD for Renminbi? "RENMINBI DEMAND IS ABOUT TO EXPLODE"! lol. Sorry for hijacking your title JC, I couldn't help myself 🙂

      Check out the Asian table on the site above.....

          1. In my opinion a good explanation about "foreing reserves" would be very interesting for some of your readers, JC. I mean how the reserves work and its function in each country balancesheet, specifying clear ideas if possible, as you do always.

            I hope you find it a good a idea to write a post in the not long future, for me it would be very usefull.

            Best Regards.

  5. The RMB will be the currency. The petro- dollar is dying on the vine.

    Putin recently stated they will no longer use the dollar re: business.

    The Trillions of Fed $ will eventually find its way home.

    The world grows weary of the U.S. stranglehold.

    Time will tell.

    Best to All

  6. JC- How do you think this will effect the Chinese Stock Market? On one hand the shares are denominated in Yuan but on the other any appreciation is going to temporarily hurt exports which is currently their main driver.

  7. It has to be exhausted to give us as much information as both (Dane and Alan) of you are doing. Thank you very much for it. It is true that for a foreinger much time is necessary but I learn two things.

    I am near the point to accept that, finally, "Gas Natural" will be in the group of metals or.....may be not?

    Best regards for all.

  8. "What Future for Unconventional Monetary Policies"

    "How quickly should the United States tighten monetary policy and exit from quantitative easing?

    Is the neutral real interest rate lower than before the crisis?

    Should we raise inflation targets?

    What can we learn from the unconventional policies that emerging markets adopted during the crisis?

    Are we entering an environment of global deflation?

    And if so, can the existing central bank toolkit stave off that threat?

    Seven years after the crisis, the effects of unconventional monetary policies continue to be a matter of debate. There is little consensus not only about the effectiveness of these policies in promoting aggregate demand, but also about possible unintended side effects on financial stability."

    "The upcoming IMF Jacques Polak Annual Research Conference on “Unconventional Monetary and Exchange Rate Policies” (November 5-6, 2015) will give us an opportunity to take stock of these outstanding policy questions, to gain a better understanding of the mechanisms at play and the tools available to policymakers, and to map the way forward."

    "Sixteenth Jacques Polak Annual Research Conference: "Unconventional Monetary and Exchange Rate Policies"
    Washington, DC, HQ2, Conference Hall 1
    November 5-6, 2015"


  9. I see the above only as one of the possible scenarios.

    Scenario 1 - Gentlemen's agreement

    Everyone shows up at the table, come to a gentlemen’s agreement, and act as agreed upon, and the transition is smooth. No one at the table wants precious metals to go up or be the anchor in the new system. This is the voluntary dollar devaluation/normalization scenario. Exchange rates will be adjusted, dollar denominated debt will be devalued and restructured using substitution accounts and against other appreciated currencies. This is the textbook scenario (or planned scenario) but I don’t think this is possible anymore as there is clear in-fighting and it is too late for any currency or currency basket to act as a viable anchor at this point. All currencies have been damaged significantly and there is more to come.

    Scenario 2 - In-fighting

    The factions fight (I see two major ones but there may be more) and don’t allow the transition to be smooth. Their survival is at stake. They make moves against each other which I think is what we are seeing play out in the middle east, stock/bond markets, currencies etc. This is the real world scenario and the way these situations typically play out is that each party fights till the bitter end and they either both exhaust all options and destroy each other or there will be a winner but with significant damage. Either way, the whole system will take a significant hit. This is what I think we are seeing.

    One of the potential moves that the banking interests might make is to force a dollar devaluation by revaluing gold. This is clearly not the preferred option but may end up being the last resort. This assumes that the US doesn’t have any secret stashes of gold. If that is the case, then silver may be used to revalue the dollar. Silver leads and gold follows. Perhaps US has a lot of silver too. So, there is a chance for PM revaluation but I don’t know what the probability is.

    If it is not the PMs, then there has to be some other anchor to the system. May be carbon based credits/debt like Alan’s links suggest? That system hasn’t been fully setup and is not mature yet even though they have been making progress. There may be other anchors possible and it’d be good hear from the readers.

    What I see is that every move made by one faction is being sabotaged by the other one and vice-versa. One faction pitches global warming and the other says that it is a myth. One faction is using ISIS to get rid of Assad and the other is fighting them. One faction needs the oil price high to sustain and the other is working on keeping the oil price low. One faction wants normalization and the other one is working to make sure that doesn’t happen.This is what is resulting in all the confusion due to seemingly contradictory statements/actions by the members of the same government(s). This also explains all the volatility we are seeing in all the markets.

    And then there is also the CSI. It is not the interest of any of these factions to let the masses know what’s really going on. There will be continuing CSI but not everything we are seeing is CSI.

    It’d be good to hear others’ thoughts on this as well.

  10. Gold has technical support around $950 US and the PM market is NOT large enough for institutional money to invest in neither is US stock market. China will benefit from the US policy BS but the pendulum swings slowly for is huge. Gold and Silver are going to see a bottom very soon but after its in the question is will you find any to buy.

    We are not institutional investors so can we really compare what instrument we should be invested in versus the big money?
    I say no. We are shrimps in the ocean of wealth being pulled by the currents. I will take physical gold and silver investments at any price to ride out this storm of manipulated markets and ponzi schemes. In the end I will hold something of value to start over with the rest of the greedy investors who thought they would receive gains for doing nothing will learn a tough lesson.

  11. It took a year of reading ... but I'm starting to get it. Thankfully I listened to you and now as my eyes are opening to all this, I'm even more grateful for finding this website and all your hard work. You as well Alan!! all those links are so helpful!!!

    thanks bud

  12. Lol. That's exactly where my mind went...loved the show 🙂 Thanks Alan this research is real exciting.

    I just passed a semi but it was running on compressed natural gas instead of liquid natural gas. The sleeper was about half size and looked like we're they pump in the gas. Interesting.

  13. I am interested in this statement - simply from a research and an observation point of view. That is;

    a comment made by Yi Gang, deputy governor of the People's Bank of China back in what appears to be 2013:

    "...appreciation of the yuan benefits more people in China than it hurts..."

    It is increasingly clear that there is an expansion of RMB-denominated assets becoming available for domestic investment within China as well as direct foreign investment flows into RMB-denominated assets.

    After some quick investigation, we find that deputy governor Yi gang has written an article in 2013 suggesting that China is a prime Optimal Currency Area [available at the IMF website]:
    Exchange Rate Arrangement: Flexible and Fixed Exchange Rate Debate Revisited
    Gang Yi
    The People's Bank of China

    "...However, even with these diversities, China is still better positioned as an optimal currency area than the euro zone and can issue a common currency, for China satisfies several key elements that are required by an optimal currency area..."
    "...As long as fiscal transfer and macroeconomic policies work well, and the labor market remains highly mobile, China as an optimal currency area will operate smoothly and stay sustainable, albeit the diversities remain..."

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