[yafbum]

My understanding: business A sells USD 1,000 worth of goods abroad.

Customer wires USD 1,000 to bank B to the account of business A as payment for the goods.

This money does not go directly to the account of business A.

Bank B sends USD 1,000 to Central bank and gets RMB 7,000 (or whatever the exchange rate is) which go to the account of business A.

Bank B ends up with deposits almost entirely in RMB to loan out. Few customers outside China really want those.

Compare with a situation in which bank B kept its USD on the books as customer deposits. Then it would have USD to loan out, and the market for such loans is much bigger.

[MayeulC]

> Few customers outside China really want those.

Hence probably why China is pushing other countries to use Yuan as an exchange currency?

[yafbum]

This is one of the aspects of "RMB internationalization" strategy https://en.wikipedia.org/wiki/Internationalization_of_the_re...