The People’s Bank of China recently approved the inaugural issue of bonds denominated in SDRs (Special Drawing Rights) by the World Bank. This is the first bank to receive such approval and represents the beginning of the SDR bond market in the world’s second largest economy.
In issuing the SDR bonds, the World Bank is expanding its product base as it looks to open and develop new markets.
Why is this important?
This new issue of SDR bonds in the Chinese market may yet be another sign of China’s rise to international prominence.
What exactly is a SDR or Special Drawing Right?
SDRs are an international reserve asset that was created by the IMF in 1969. As an addition to a nation’s own reserves, the SDR derives its value from four currencies: the dollar, euro, pound and yen. In a highly publicized decision earlier this year, the IMF approved reserve currency status for the Chinese Yuan, which will be added to the SDR basket of currencies in October of this year.
World Bank Group President Jim Yong Kim stated: “We are very pleased to support China’s growing role in global financial markets. World Bank issuance of SDR bonds in China will support the G-20’s objective of expanding the use of SDRs and help promote the development of China’s domestic capital market.”
World Bank Vice President and Treasurer Arunma added: “The World Bank Treasury appreciates China’s approval of the World Bank as the first issuer of SDR-denominated bonds in its own domestic market as a further step in the internationalization of the Chinese capital markets.”
This would seem to represent another key stride for China as it continues to cement its place among the global economic elite.
It could also represent another step towards a Chinese Yuan challenge of the U.S. Dollar as the global reserve currency of choice.
We have said it before, and we will say it again. If the dollar were to fall out of favor as the global reserve currency of choice, the consequences could be devastating. Imagine a flood of dollars finding their way back to the U.S. all at once. The massive supply of dollars would push the value of the currency sharply lower.
Imagine, for a moment, paying $10 for a gallon of gas or $5 for a loaf of bread. Life as you know it today would be very different if the dollar lost a significant amount of value.
That’s why it is so important that you take steps now to try to protect yourself and your financial future.
One such way to do so is to consider investing in hard assets like physical precious metals. Gold and silver have been considered a reliable store of wealth and value for thousands of years and carry no counterparty risk.
Physical gold and silver may potentially help preserve your purchasing power as paper currency values decline. If you don’t already own physical gold, silver or other precious metals, now is the time to consider an allocation.
Speak with an Advantage Gold account executive to explore your options today. Our precious metals account professionals will discuss with you the potential benefits of physical gold and silver ownership, and will act as your guide to acquiring and holding these key precious metals. We can even show you how to buy and hold physical gold or silver using your IRA account.
Don’t wait for the dollar to decline further and for a larger reduction in your purchasing power. Take steps to help secure your financial future today. Call us at 1-800-341-8584 to learn more.Tags: advantage gold, bond market, china, currency wars, gold, IMF, sdr, special drawing rights, world bank, world currency