Should we hoard rmb or usd?

June 23, 2026 13: First, let's establish a fact: as long as you live in China, no matter how much usd you hoard, you are only a "relative usd player" and it's basically impossible for you to become a usd-dominated player.

Because you earn in rmb, spend in rmb, your house is an rmb asset, and the most convenient and quick-to-access currency in emergencies is still rmb.

So regardless of how much usd assets you hold, since your rmb assets are constantly increasing and you always need to use or set aside them, you are most likely unable to hold more usd than rmb in the long term.

Under this premise, let's discuss whether you should hold some usd assets to diversify risk — what kind of risk?

Hasn't the rmb been rising all along? If you convert to usd, wouldn't you lose money?

Yes, but at the same time, you could also say that every time you exchange for usd, you get more than the previous time, right?

In the context of the rmb's continuous appreciation, exchanging for usd seems to be a constant loss, but it's not that simple.

Exchanging for usd is just a way for ordinary people to balance risk — what risk?

Systemic risk, similar to Buffett buying cash options, paying a certain inflation tax to bet on the chance that an asset might be mispriced and drop 70% one day.

Why do I say we might need to be wary of systemic risk?

Everything looks fine, thriving — really?

Let's briefly sort out what kind of era you are in now.

What is the situation in China? I'll break it down into categories: 1. High debt levels.

To reduce debt interest expenses, interest rates must be continuously lowered, replacing high-interest debt with low-interest debt.

But doing so creates an obvious arbitrage window with the us's high interest rates, so what to do?

Strict controls must be imposed on rmb going out for arbitrage, otherwise the rmb exchange rate will face pressure.

But if money can only come in but cannot go out, who would dare to invest?

Thus the second point: 2. Dual-track rmb.

We prevent money from going out, including suppressing channels for us and hk stocks, essentially also to control the rmb exchange rate.

But this is only for ordinary people in China; if you are foreign capital, obviously your investment returns in China can have channels to flow back — this is the dual track. By controlling the exchange rate, offshore rmb becomes attractive, and more holdings from overseas will emerge;

Opening smooth two-way channels for overseas institutions will allow rmb to be used more widely, so as to collect more seigniorage in the future, and then the third point: 3. rmb internationalization.

China is a large surplus country, earning a lot of usd in trade, and strictly controlling rmb outflows, so we have full confidence to support the rmb exchange rate.

But precisely because of this, you are always earning money inward but not spending outward, and ordinary people are controlled and cannot go out, so how can your own rmb become internationalized?

The state spends it for you.

So you will find that our outward spending is basically not done by ordinary people, but rather the state provides large amounts of foreign aid, overseas investment, swaps, etc.

Okay, now you know why the rmb is rising?

Abroad, rmb has increased its degree of internationalization and is held more; domestically, by controlling ordinary people's rmb, the circulation volume is controlled, making it easier to use the large amount of usd reserves to make markets and control prices.

So the question is, when something seems very stable, are you willing to bet everything on it?

I am not very willing.

The reason is simple: its exchange rate price is distorted.

Of course it is now very stably controlled, and from all aspects it seems to support that it will be controlled forever, but distortion is distortion — one set domestically, one set internationally, entirely relying on controls — can it work forever?

I don't think so, or maybe it will work forever, but I always leave myself a backup plan for "what if it stops working", i.e., systemic risk — it's not that under normal circumstances the rmb exchange rate will have significant fluctuations, but rather that I will hoard a little usd assets in case something abnormal happens, so that when systemic risk occurs, I can respond flexibly.

You ask what will happen? I don't know, but I don't want to stake all my assets on something distorted — that is far more important than whether the exchange rate will rise or fall slightly.

However, despite this, I still hold a large amount of rmb assets, because as I said, even if you don't always live in China, as long as you spend some time there and your business is in China, there will always be a significant amount of assets left in China — it's unavoidable. Given this, even if you hold usd assets, it doesn't mean you hope for something bad to happen domestically.

But one cannot base one's life solely on "hope" and "expectation" of anything; it can only be confined within your "plan".

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