Hacker News Reader

Comment by bobthepanda | Hacker News Reader

If your solution to USD being restricted is to trade in CNY you‘re in for a rude awakening.

CNY does not freely flow across the Chinese border, and the government will not hesitate to put strict capital controls to limit inflows and outflows. The government knows that this prevents it from being used as an international reserve currency, but they would rather keep stability in the Chinese economy.

View on HN

What exactly do you mean by "flow across the Chinese border"? It's my understanding that all electronic USD are in the USA, either directly in the central bank or indirectly through another bank which has an account in the central bank. They can't actually flow out of the country, except as cash.

China controls the use of CNY to buy non-domestic things, particularly foreign exchange. Domestic companies and savers‘ “movement” of the currency is tightly controlled, and the government has immediately tightened the screws on everyone before.

USD is not controlled in this manner, which makes it pretty easy to obtain. One of the important features of a reserve currency is easy obtainability and convertibility, but this runs counter to China’s internal stability goals.

That's why China created the Digital Yuan for overseas trade.

Digital Yuan are currently not approved for international use. And they seem to be subject to the exact same Chinese capital controls that traditional CNY are subject to, if I’m not mistaken.

Reply on news.ycombinator.com