In October last year, the President of Serbia created a stir by suggesting that the National Bank might consider adding the Chinese yuan to Serbia’s foreign exchange reserves. However, there has been no further mention of this since then.
When asked about this potential decision, the National Bank of Serbia (NBS) did not provide a direct answer. Instead, they referred to regulations governing foreign exchange reserves management, explaining that the currency structure of reserves aligns with Serbia’s external debt. This practice, known as “natural hedging,” helps mitigate currency risks.
The NBS stated that they are constantly considering currencies to diversify their investment portfolio. Given the yuan’s presence in Serbia’s external debt structure and its growing importance globally, investing in assets denominated in yuan could be an option to expand the NBS’s portfolio.
Despite the increase in borrowing from the Chinese Export-Import Bank, which reached almost 2.7 billion euros, the yuan’s significance for Serbia remains low, as evidenced by its minimal share in Serbia’s public debt currency structure.
Including the yuan in foreign reserves could be seen as a strategic move to enhance economic cooperation with China. However, it also raises concerns about Serbia’s alignment with a major world power and potential implications for economic independence.
Recent developments, such as the Free Trade Agreement with China and the memorandum for establishing a clearing arrangement, indicate a growing relationship between Serbia and China. These agreements aim to facilitate trade transactions in yuan, streamlining cross-border transactions between the two countries.
Some experts caution against tying Serbia’s financial system too closely to China, citing concerns about the yuan’s stability and dependence on Chinese policies. They emphasize the need for Serbia to maintain a balanced approach to international economic relations.
Furthermore, the increasing use of the yuan in global trade, particularly in transactions with countries under sanctions like Russia, raises questions about Serbia’s role in potential sanctions evasion. While Serbia has not imposed sanctions on Russia, its close ties with China could inadvertently facilitate circumvention of international sanctions.
In conclusion, while the inclusion of the yuan in Serbia’s foreign reserves could offer economic benefits, it also poses risks and challenges. Serbia must carefully consider the implications of such a move and ensure it aligns with its broader economic and geopolitical interests.
