The Chinese currency is positioning itself as a global currency: is it time to invest in yuan?

In the context of an increasingly multipolar global economy, the Chinese yuan emerges as one of the major stories in the international market. The agreement signed between China and Brazil earlier this year – whereby both nations agreed to use the yuan as a reference for their bilateral trade and investment operations – marked a turning point in the global geoeconomics. This pact is not merely an administrative detail but reflects a fundamental shift in the balances of global economic power.

The Inevitable Rise of the Chinese Economy

The numbers speak for themselves. China’s economy is growing at an annual rate close to 5%, a figure that contrasts notably with the performance of its main competitors. The European Union achieves only about 3.6% growth, while the United States lags behind at just 1.1%. But the gap does not stop at growth rates.

While inflation continues to be a nightmare in Europe, China has managed to keep it virtually under control. This difference has real consequences: Western economies face severe credit restrictions and depressed private investment, precisely when China advances without these obstacles. The contrast is dramatic.

In terms of currencies, the recent correction of the yuan during the first months of the year has brought it back to levels seen in November of the previous year, approximately at 0.137 USD. Analysts consider this level as the floor for the Chinese currency. If this hypothesis is correct, we are witnessing the beginning of a new bullish cycle that could push the yuan significantly above 0.15 USD, the level at which it traded in early 2022. And in the new world order, previous ceilings may become obsolete.

Asia Looks to Beijing: The Yuan as a Regional Benchmark

The dominance of the yuan in the Asian region is becoming increasingly evident when examining its currency competitors.

The Japanese yen is in trouble. The Japanese currency is dangerously approaching its 20-year lows, following a sharp decline between 2021 and 2023. Japan is also facing a deep demographic crisis that will continue to pressure its economy for years.

South Korea is experiencing a similar situation. The won suffered a severe depreciation over the past twenty-four months. Although it experienced a notable rebound at the end of 2023, it is currently stabilizing around 0.00076 USD, far from the aspirational level of 0.001 USD it had before the 2008 financial crisis.

This leadership vacuum in monetary terms in Asia is naturally filled by the yuan. ASEAN countries are experiencing vigorous economic development, largely driven by Chinese demand and investment. China maintains increasingly robust confidence in its currency, especially considering that neither Latin America nor Africa present comparable development alternatives that could compete with Asian dynamism.

A Geopolitical Reordering Affecting the Dollar and Euro

The euro and the dollar will remain important currencies over the next decade. However, their absolute dominance in the international monetary system will inevitably diminish. The dollar, which reached its peak influence during the 1990s and the first decade of the new century, now faces increasing challenges in a multipolar world.

The emerging landscape suggests three major economic blocs: one led by the United States (y Canada), another by the European Union, and a third by China. It is precisely the Asian bloc that is experiencing the most vigorous growth both economically and technologically. This dynamic inevitably points toward a gradual devaluation pressure on the currencies of the other two blocs.

The Opportunity of the Moment

Investing in yuan in the current context represents a forward-looking position ahead of what appears to be a substantial change in the global monetary paradigm. The Chinese yuan has completed its short-term correction, and all signs indicate it will initiate a significant bullish momentum in the coming years.

Unless there are unforeseen geopolitical or economic surprises, positioning oneself now in yuan could generate considerable returns in the medium term. The forex market and pairs involving the Chinese currency offer multiple avenues to capture this expected revaluation. The window of opportunity opens precisely when most investors have not yet fully integrated this shift into their portfolios.