The reserve currency concept is fairly ridiculous. Some Chinese might assume holding us dollars, euros, or yen helps gives their RMB credibility. It is hardly necessary. What gives a currency credibility is the amount of goods that currency can purchase from the country that currency was minted from. If we were to assume the purpose of accumulating foreign currencies was to act as a reserve for the RMB, much the same way gold acted as the reserve to global currencies prior to the 1930s. Then the Chinese must have realized that it has basically forced the RMB to be a non-credible monetary unit in order to have accumulated this reserve base. The currency is so undervalued, average citizens in China make between 2 to 10 dollars a day. Wages and incomes are already being attacked by the Chinese government, that no currency trader could attack it much more than it already has by the CCP.
These so called reserve currencies are not backed by any tangible reserves themselves, so what difference would it make that the RMB was being backed by these foreign currencies.
A float wouldn't damage the RMB's credibility. It would only strengthen it. And if we were to assume that the market had forced the RMB to become too overvalued and thus traders then hoped to damage its value. What would it matter. A weaker RMB would force Chinese exports to appear more attractive again thus resulting in another wave of Chinese exports flooding the global markets. The trade surplus would further extend in China's favor as a result of a weak RMB. It is win win either way. China either floods the world with RMB or it floods the world with its exports.
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