For a manager of foreign exchange reserves it used to be a no-brainer. You hold your money in the United States, simply because they possess a winning combination: a large, dynamic and integrated economy as well as robust public institutions, including a reliable central bank and an effective legal framework.
These institutions guarantee that you will not have to deal with an unreliable government, which for example, suddenly comes up with the idea of boosting inflation to burn off debts. Your money is safe and broad, deep markets ensure that you can easily repatriate big sums if you want to. A country like China lacks institutions that are independent of politics. Therefore the renminbi will never be able to match the status of the dollar, so I always thought.
But with president Donald Trump things have started to tilt. With his super-expansionary fiscal policies in times of economic boom, chances are that he will allow the economy to boil over. He not only risks a large wave of inflation, but also, according to the US Congressional Budget Office, that budget deficit results in a national debt of no less than 180% of GDP by 2035. Tellingly, Moody’s already warned that the USA’s ‘triple A’ status is in danger.