Why the yuan hasn’t become a global currency: Dollar, euro, and the illusion of the Brics currency

The discussion on alternatives to the dollar is not new. Whenever there are geopolitical tensions, the debate resurfaces: why is there still no currency capable of competing with the dollar? The answer lies in the euro, BRICS, yuan, and, mainly, in real macroeconomics. Why doesn’t the yuan become a global currency? China has the economic size to launch a dominant currency, but it doesn’t want to pay the macro and institutional cost that this requires. The main factors are: Capital controls, Strict barriers to the entry and exit of resources prevent the full convertibility of the yuan. Currency intervention, The exchange rate is administered, not floating. Global investors do not trust politically managed currencies. Lack of monetary independence, The People’s Bank of China answers to the central government. Without autonomy, there is no credibility for international reserves.