Perhaps in response to a semi-annual foreign exchange market report by the U.S. Treasury released on Jan. 29, which called on China to allow the RMB to “strengthen in a timely and orderly manner,” China two days later published a speech by President Xi Jinping from 2024 in the widely read CPC theoretical journal Qiushi, indicating China’s intent to allow the RMB to begin to serve as a reserve currency. While at the time, the speech was not widely circulated, the Qiushi article has created major hysteria in London, with the Financial Times noting nervously that the speech “marked Xi’s clearest definition yet of his goal of a strong currency, as well as the broader financial foundations Beijing will need to support it.”
“Given China’s extremely large and growing external surpluses and now substantially undervalued exchange rate,” the Treasury report says, “it is important that the Chinese authorities allow the RMB exchange rate to strengthen in a timely and orderly manner in line with macroeconomic fundamentals.”
In his speech, Xi underlined the principles of financial development “with Chinese characteristics.” First, a strong currency used widely in trade and investment; second, a strong central bank; third, strong financial institutions; fourth, a strong international financial center capable of attracting global investors; fifth, strong supervision; and sixth, a strong financial pool.
