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Is it worth investing in Yuan?

Is it worth investing in Yuan?

Today, only the lazy did not talk about China's economic success, because the country in a fairly short period of time has turned from a backward agricultural state into one of the most advanced economies in the world.  And even though some moments of Chinese reality raise questions, many investors have already started to speculate on this currency. So let's try to figure out whether to invest the yuan?

 

Yuan's problems

 

In order to understand whether the yuan is a worthy investment target, it is worth understanding its main problems and shortcomings.

 

First of all, the liberalized movement of capital in China, including the Chinese currency, is not fully evident. What can it affect? Roughly speaking, because of this state of affairs, the movement of the yuan against the dollar and other currencies very often may not be subject to market laws and therefore, any forecast of a change in the price of the yuan becomes even more unpredictable, even taking into account many scientific methods.

 

That is, if tomorrow all the economic indicators of the Chinese economy in general and the Chinese yuan in particular will say that the currency will soon depreciate, the powerful Chinese Communist Party may come and this fall will simply cancel. But the same can be seen in many post-Soviet countries, including the ruble? Yes, but with China it is still more difficult, because one way or another, almost completely marketable, the Russian economy has a rather limited toolkit, unlike China.

 

Nevertheless, in recent years we can observe trends towards gradual liberalization of the Chinese economy, and almost simultaneous increase in the share of the yuan in the reserves of the IMF, EBRD and Russian banks. This is a very interesting trend and many experts say that soon the Chinese yuan, at least in European reserves can take the place of the pound sterling.

 

What about ordinary investors?

 

So far, the benefits of investing in the yuan look rather elusive, apart from the problems described above, many negative economic indicators are added here, including the excess of private debt gross domestic product, the rather high level of defaults on corporate loans, as well as the lack of provision of many social guarantees, especially outside the major cities.

 

In addition, the unpopularity of this currency among investors is affected. On the one hand, this should have a positive effect on the dynamics of the price of the yuan, because the demand in the foreign exchange market is quite low, but on the other hand, due to the exclusivity of transactions to buy and sell currency hypertrophied commission, which in the end makes speculation with the yuan a little profitable occupation.

 

Total

 

The yuan is a rather promising currency, but so far the risks that arise when interacting with it are not justified by possible benefits, but soon the situation may change dramatically and many of the problems described above will be solved. Therefore, investors interested in investing in the yuan should keep their finger on the pulse and track the beginning of such changes, because if you can accurately predict this moment, you will get a pretty serious profit.

24.05.2021
618
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