Foreign exchange reserves, as one of the country's financial security guarantees, play a vital role in maintaining international economic stability and coping with external financial risks. It can balance the balance of payments, maintain exchange rate stability, and withstand the impact of external financial fluctuations. However, the composition of global foreign exchange reserves has been in the spotlight, and the dominance of the US dollar seems to have endured.
According to the data, as of the end of February 2022, the mainland's foreign exchange reserves have reached US$3.21 trillion, ranking first in the world. At the same time, the latest data released by the International Monetary Fund shows that the US dollar still dominates global foreign exchange reserves, accounting for 58.81%, totaling $7.08 trillion, although it is down from the previous quarter.
The dominance of the dollar is not accidental; it stems from both historical and economic power. The Bretton Woods Conference after World War II established the US dollar as the world's main currency, and then the US dollar was pegged to gold and became the core of the global monetary system. This status led countries to use the dollar to settle international trade, which in turn consolidated the dollar's global position as oil trade was pegged to the dollar.
However, it is worth noting that while the US dollar dominates global foreign exchange reserves, the US has been running a trade deficit of $859.1 billion in 2021, mainly caused by high-end manufacturing and the export of some agricultural products, while large-scale imports include consumer goods, clothing, electronics and household goods. This suggests that the dollar's global dominance is not necessarily directly related to trade surpluses.
Among foreign exchange reserves, the euro ranks second, with a size of $2.48 trillion, accounting for 20.6%. The euro's prominence is due to the fact that the EU has brought together a large number of advanced economies to form the world's largest economic union. However, the EU's economy has gradually been surpassed by the United States and China in recent years, which has also led to a decline in the euro's share of global foreign exchange reserves.
The yen ranked third, reaching $671.7 billion, accounting for 5.5%. Although Japan is the world's third-largest economy, its trade is relatively large and its share of global foreign exchange reserves is higher than that of the pound.
The pound, as the currency of the old developed countries, has a size of $576.2 billion, accounting for 4.7%, ranking fourth in the world. Although the pound sterling was once one of the major global currencies, its status gradually declined with the rise of the US dollar.
So, how does the renminbi rank in global foreign exchange reserves? According to the latest IMF data, the size of the renminbi reached US$336.1 billion, accounting for 2.79%, a record high. However, compared with the mainland's huge economic size and trade status, the renminbi's share of global foreign exchange reserves is still low, which means that there is still room for improvement.
Fortunately, with the continuous increase of the mainland's comprehensive national strength and the expansion of trade scale, more and more countries have begun to include RMB in their foreign exchange reserves. For example, in Brazil's latest data on the proportion of foreign exchange reserves, the share of the renminbi increased from 1.2% to 4.99%, a record high. This shows that the renminbi's position in global foreign exchange reserves is expected to be further enhanced.
In summary, changes in the composition of foreign exchange reserves reflect the evolution of the global economic landscape. While the dollar still dominates, the rise of other currencies and the emergence of the renminbi suggest that the international monetary system is changing. With the continuous rise of the mainland economy, the renminbi is expected to play a more important role in global foreign exchange reserves, which will also help enhance the mainland's influence and voice in the international financial system.