The following is from Hideo Tamura’s regular column in today’s Sankei Shimbun titled “The Creeping Threat of a Yuan Collapse.
It is an obvious fact that, as with Prime Minister Kishida, the so-called academics and most of the reporters in the economic section of the media are at the beck and call of the Ministry of Finance when it comes to the economy.
Unlike those who make their living by taking knowledge from the Ministry of Finance, Hideo Tamura and Yoichi Takahashi have hit the nail on the head with their well-researched insights.
They are uniquely valuable human beings to the nation of Japan, or in other words, “national treasures” as defined by Saicho.
It sheds light on hidden and concealed truths and elucidates and teaches us about them.
In other words, it is a “national treasure” that continues its work of illuminating a corner of the world.
It is a must-read not only for the people of Japan but also for people around the world.
Emphasis in the text other than the headline is mine.

The Xi Jinping administration in China is accelerating the shift to yuan settlement for trade and financial transactions.
But, as the old saying goes, “It is the deceitful man who most often falls into the snares of deceit.
　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　The yuan’s decline has become unstoppable.　　　　
Since the outbreak of the trade war with the United States five years ago, the Xi administration has been working to increase yuan settlements.
In late February of last year, it accelerated the expansion of yuan settlements in view of the financial sanctions imposed by the Group of Seven (G7) industrialized powers against Russia for its aggression in Ukraine.
In terms of payments, China’s share of payments by currency was 24% for RMB and 62% for the dollar in June 2018 and 41% and 52%, respectively, in February 2022, but this reversed in March of this year, and in July the gap widened to 51% and 41%.
The same trend was seen in terms of receipts, with 22% of the yuan and 71% of the dollar in June 2018, reversed in May of this year, and 49% and 47% in July, respectively.
It has not only replaced the dollar with the yuan in Russia.
He saw it as an opportunity to tap into the Global South, which refuses to sympathize with the West’s sanctions against Russia.　
Last December, Xi visited Saudi Arabia and attended the China-Gulf Cooperation Council (GCC) summit in Riyadh, where he called for a yuan-denominated settlement of oil and natural gas trade and announced that he would “make full use” of the Shanghai Oil and Natural Gas Exchange.
In January of this year, the Saudi Ministry of Finance stated that it would be open to discussing trade settlements in currencies other than the dollar.
In February, the Iraqi Central Bank announced it would allow yuan settlements in trade with China.
In March, the Xi administration brokered the normalization of relations between Saudi Arabia and Iran.
It was followed by the Saudi government’s decision to join the Shanghai Cooperation Organization, a consultative body for China, Russia, India, and Central Asian countries.
China and Brazil agreed to begin trade and financial transactions in the renminbi and Brazilian currency, the real.
In the same month, CNOOC, China’s state-owned oil giant, also purchased liquefied natural gas (LNG) from the United Arab Emirates (UAE) in yuan.
In April, Argentina’s economy minister announced that the country would stop settling dollar-denominated payments for goods imported from China and pay in yuan.　
On August 24, at the BRICS (China, Russia, India, Brazil, and South Africa) summit in Johannesburg, South Africa, six new BRICS members were decided: Saudi Arabia, UAE, Iran, Egypt, Ethiopia, and Argentina.
It is a double whammy with Mr. Xi’s ambition to expand the yuan settlement circle.　
Although the above may seem to be a strong point for Mr. Xi and his close aide, Foreign Minister Wang Yi, there are always pitfalls in the complexities of international finance.　
China’s financial and capital markets are highly opaque and regulated, full of risk.
Foreign governments, companies, and investors are unlikely to be willing to invest the enormous amount of yuan they have acquired in China as assets.
The same applies to President Vladimir Putin and his cronies, the foremost Russian energy companies.
The Russians, for example, have their yuan exports deposited into Hong Kong bank accounts, but they immediately convert the yuan into dollars.
As evidence, yuan deposits in Hong Kong have barely increased since their sharp increase around February 2022, after which they have fallen sharply.
The advantage of Hong Kong, an international financial market, is the free exchange of yuan for dollars and other currencies and access to the securities markets in Shanghai and Shenzhen via the Hong Kong Stock Exchange.
However, Chinese stock and bond markets continue to fall and are full of risk of loss, so they are not being looked at.　　　　

This graph shows the change in the People’s Bank of China’s foreign currency assets and the RMB exchange rate since the start of the war in Ukraine.
The decline in the yuan exchange rate stopped in November of last year. Still, it had continued to fall again since the beginning of this year and fell further in August when the real estate developer crisis worsened, and the scorching of trust products came to light.
The reason the yuan has been able to avoid a collapse despite the storm of yuan selling led by the Hong Kong market is the People’s Bank of China’s (PBC) efforts to support yuan purchases.
The People’s Bank of China (PBC) operates under a managed floating exchange rate system.
The yuan exchange rate against the dollar is based on the previous day’s closing price, and fluctuations are limited to 2% above or below that price.
Therefore, the People’s Bank of China withdraws foreign currency assets.
Foreign currency assets are significantly reduced whenever a large amount of yuan is sold.　
The problem continues beyond there.
Foreign currency assets back the issuance of yuan funds by the People’s Bank of China.
As foreign currency decreases, it becomes more challenging to increase yuan issuance.
Despite the deepening recession caused by the real estate bubble bursting, the People’s Bank of China (PBC) has no choice but to limit its quantitative easing to a small scale.
Even if the interest rate is cut, it will invite massive yuan selling, and even recently, it was only by a small margin of 0.1%.　
Mr. Xi’s ambition to expand the RMB circle has put the Chinese economy in an unprecedented predicament.