GEAB 207

The recommendations below are the result of a systemic forecasting approach specific to the GEAB. They do not constitute personalised financial advice or investment recommendations. In a context of high volatility and global transition, each reader remains solely responsible for their own decisions. It is recommended that these analyses be cross-checked against other sources and, if necessary, that a qualified professional be consulted.

Finance: From carry trade yen to the Asian Carry Ecosystem

Japan’s monetary normalisation could gradually undermine one of the key financial mechanisms of recent decades: the carry trade yen, but focusing on which currency will replace the yen risks obscuring a more significant transformation. The successor to the carry trade yen may not be a currency, but a decentralised Asian ecosystem of financing, intermediation and yield-seeking. The first signs are already visible. The offshore yuan (CNH) is being used as a funding currency. During the unwinding of carry trades in August 2024[1], the Bank for International Settlements[2] noted that the CNH had behaved like a funding currency: short positions in the yuan were used, in particular, to fund exposures to Asian currencies offering higher yields. As early as 2024, Reuters was simultaneously reporting on the development of various forms of carry trade yuan[3]. But the phenomenon could extend beyond hedge funds. Behind the RMB lies a considerable mass of Chinese savings, whilst domestic yields are falling (when Western bond yields are soaring, the opposite is happening on the Chinese side: the yield on 10-year Chinese government bonds has slipped to 1.68% – 1.69%[4]) is driving insurers, banks, asset managers, businesses and savers to seek diversification and returns[5]. By 2026, offshore renminbi borrowing is thus approaching the record level of 1,000 billion, buoyed by the low cost of Chinese financing[6].