Dumb and Dumber (Ideas)

It’s not about GDP composition.

It’s about trade surplus translating into reserves denominated in liquid currency.

China can have a large domestic economy in yuan and still face external constraint because:

• ~85–90% of global FX transactions involve USD

• ~58–60% of global reserves are held in USD

• The yuan is ~3% of global FX turnover and ~2–3% of global reserv…