China's import and export trade settlement in RMB exceeds 50%, surpassing the US dollar for the first time, and many countries have started to settle trade with China in RMB.

Many people believe that this will further enhance the international status of the RMB, but the reality is not as simple.

For the RMB to truly elevate its international status, it needs to increase the demand for, and the flow and use of, the RMB by various countries, which would then promote its status.

In other words, if all countries were to rush to reserve RMB as a foreign exchange, the RMB would be highly sought after.

However, since the first half of the year, the share of RMB in foreign exchange reserves has not increased but has actually decreased.

Last year it was 2.8%, but now it stands at only 2.5%.

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The US dollar, which everyone thought would depreciate, has not only not depreciated but has been appreciating, with its share of foreign exchange reserves rising to 60%.

Aren't we all talking about de-dollarization?

Aren't we all saying that the RMB will further enhance its international influence?

So why has the share fallen?

It is true that countries are actively de-dollarizing, but this is not something that can be achieved in a day.

In this era of fluctuating exchange rates, whoever has more foreign exchange reserves can resist currency devaluation and inflation risks.

Although everyone does not want to be harvested by the US, the US dollar is currently the most effective moat to resist risks, and it is more important to survive the downturn, so everyone is forced to choose the US dollar.

In addition, as the US dollar enters an interest rate hike cycle, investing in the US dollar can yield stable returns.

There are many investors who play with exchange rates and US debt.

Investors only care whether the returns are greater than the risks, and they do not care who dominates foreign exchange.

Since the Fed's interest rate hike last year, the terminal interest rate has reached 5.25%-5.5%.

The interest rate hike has led to the appreciation of the US dollar.

If you exchange your money for US dollars and then exchange it back to your local currency when the interest rates are lowered, you can earn a substantial interest rate difference.

Moreover, compared with the stock market and funds, this kind of return has almost no risk, so many investors choose to exchange dollars, causing the US dollar to be in short supply.

In addition, due to the lifting of the debt ceiling in the US, a large amount of US debt has been put into the market, and now the yield of US debt for one year has reached 5.4%, so many investors exchange dollars to buy US debt.

US debt is almost a risk-free asset, and such a sheep's wool is something that no investor wants to miss.

Moreover, 40% of global trade settlement currency is still the US dollar, and only with a higher reserve of US dollars can we maintain the advantage of import and export trade.

Without US dollars, it will limit the development of import and export trade, which is something no country wants to see.

Therefore, from the perspective of risk resistance and the perspective of obtaining returns, governments and institutions of various countries will try every means to obtain US dollars.

The US dollar, due to its hegemonic status, can be understood to have a series of "disturbing operations" that lead to currency appreciation.

So what is the reason for the decline in the foreign exchange share of the RMB?

1.

Although we have strengthened cooperation with various countries, and many countries have used RMB for trade settlement, such as Russia, Pakistan, Brazil and other countries.

However, our country's economic recovery is also relatively slow, and the reduction of imports also means less output of RMB, and this situation cannot be changed in a short time.

It still needs the country's economy to be further consolidated and improved to get better.

2.

Some countries and institutions are deliberately short-selling RMB.

In fact, we do not know how much RMB is used as foreign exchange reserves, but China's "One Belt, One Road" plus the process of asset digitization is getting faster and faster.

In the process of de-dollarization, it will definitely encounter obstacles set by other countries.

This does not rule out that some countries or organizations are deliberately selling RMB and short-selling our core assets.

3.

Another reason is that the interest rate difference between RMB and US dollars is getting bigger and bigger.

Recently, the Chinese bank has reduced the interest rate of US dollar accounts, from the original highest of 4.5% to the current 2.8%.

The purpose is to reduce users to exchange US dollars to arbitrage, after all, the current interest rate of RMB is only a little more than 1 point.

In the future, if the RMB wants to increase its foreign exchange share, the first thing is to develop its own economy, let the domestic economy as soon as possible out of the haze of the epidemic, increase domestic consumption and foreign imports, so that the RMB can go out.

In addition, we also need to find ways to protect the exchange rate of the RMB, so that the exchange rate can maintain a fixed level, so as to get rid of the shackles of the US dollar, and exchange rate stability can also make other countries feel safe and at ease, and can increase the confidence of holding RMB.

From a long-term perspective, the hegemonic status of the US dollar cannot be supported for long, and the US debt of more than 30 trillion, which can be detonated in an instant, will make countries go further and further on the road of de-dollarization.

At the same time, China is also strengthening cooperation with various countries, and giving more benefits to other countries in trade.

The international status of the RMB in the future will definitely be steadily improved, and become a mainstream credit currency.

What are your views on the RMB's cross-border trade settlement ratio exceeding 50%, and the foreign exchange reserve share falling to 2.5%?