China’s plan for the yuan could backfire in any crisis, strategist says

China’s currency is used in 4.3% of global foreign-exchange transactions, against the US dollar’s 88.3% share, according to the Bank for International Settlements.

TOKYO: China’s currency-swap lines with nations spanning the globe, designed to bolster the international role of the yuan, could backfire badly in a world crisis.

So argues Mansoor Mohiuddin, a senior macro strategist at NatWest Markets in Singapore. The danger is that foreign central banks would exchange their currencies for yuan with the People’s Bank of China (PBoC), then dump those holdings for dollars if a crisis hits, he wrote in a research note yesterday.