A reality check on the yuan’s prospects as a global currency

A reality check on the yuan’s prospects as a global currency

• The notion of “de-dollarization” is once again in vogue, with the yuan being floated as the dollar’s successor as a global currency. We are skeptical of such maximalist claims.
• A detailed examination of the yuan’s current position shows that it is a far cry from being a global currency. While its role will grow, overtaking the dollar remains unlikely.
• Bolstering the yuan so that it develops the necessary features of a global currency would require colossal, and ultimately unlikely, changes in Beijing’s economic and foreign policy.
• Asian governments may complain about dollar hegemony but will ultimately stick to the devil they know, while taking measures to manage the downsides.

With may elections, thailand approaches a major turning point

• Parliamentary elections next week come as the military-royalist establishment faces internal divisions and voter ire. Thailand is ripe for a transition in government.
• The Pheu Thai Party of ousted Prime Minister Thaksin Shinawatra is set to become the largest party, but the more radical Move Forward is also emerging as a formidable force.
• A “grand coalition” between Pheu Thai and pro-establishment parties is likely. That could lead to the compromises needed to heal Thailand’s deep-seated divisions.

Regional updates

• China continues its economic recovery but headwinds are apparent in both the external and domestic sectors. Misguided policy priorities by Beijing add to the woes.
• The latest Asian purchasing manager surveys show that while the current picture remains mixed across economies, firms remain confident that economic conditions will improve.
• Taiwan’s trade slowdown shows signs of bottoming out, with the pivotal semiconductors sector exhibiting a milder-than-expected contraction.
• Indonesia’s 1Q23 GDP growth held up due to domestic demand. But the deteriorating performance of capital formation indicates continued regulatory and political uncertainty.
• Malaysia’s central bank resumed its rate hikes to fully reverse pandemic-era cuts, suggesting improved confidence in the resilience of the domestic economy.

Read more: CAA-Weekly-8-May-2023.pdf