BEIJING – China is launching a sweeping campaign to promote the renminbi’s global role, seizing what officials see as a rare strategic opening.
With the dollar facing multiple challenges, Beijing is accelerating its longstanding campaign to reduce global reliance on the world’s reserve currency.
What sets the latest push apart is timing: Chinese policymakers see erratic US decision-making and geopolitical tensions as the most favourable backdrop in years to promote the renminbi.
The latest measures aim to not just facilitate trade, but also open China’s financial markets and embed the renminbi more deeply in investment flows.
They include easing capital controls, expanding cross-border payment systems, and launching new financial products to attract foreign investors.
Beijing’s hope is that a more internationalised renminbi may reshape trade and global finance and challenge the dollar’s dominance in reserve portfolios.
“The measures to further integrate China with the global financial system feel like steps in the right direction, as China wants to make sure that the yuan is in the conversation of important global currencies,” said chief Greater China economist at ING Bank Lynn Song.
Role in monetary system
In a speech last week, Chinese central bank governor Pan Gongsheng envisioned a new global currency order with a reduced role for the dollar.
He outlined a vision in which China’s financial markets are more open and the renminbi plays a central role in the world’s capital flows.
To push that vision, the People’s Bank of China plans to establish an international operation centre for the digital renminbi in Shanghai.
It is also exploring the launch of the country’s first domestic currency futures, which could compete with similar hedging tools in offshore markets like Singapore and Chicago.
In Hong Kong, a fast payment system was launched over the past weekend.
It allows residents to wire payments in renminbi or the Hong Kong dollar to the mainland for trade and services, further integrating the two markets.
The city’s exchange is also expected to add renminbi-denominated counters to the southbound stock link.
Cryptocurrency linkages are on the table as well.
Hong Kong’s Secretary for Financial Services and the Treasury Christopher Hui said recently he will not rule out the possibility of linking stablecoins with the renminbi, though he noted risks, exchange rates, monetary policy and other factors would have to be considered.
His comments came after the US Senate passed legislation on a dollar-pegged stablecoin and Hong Kong’s approval of its own stablecoin regulatory framework in May.
China is also taking steps to further facilitate capital flows by opening more domestic trading products to foreign investors later in 2025.
The authorities plan to raise quotas for local residents to invest their renminbi in overseas securities, which would increase the currency’s international circulation.
“China could be seizing the opportunity to promote RMB internationalisation,” Ms Zhi Xiaojia, an economist at Credit Agricole Corporate and Investment Bank said, adding that further steps, such as deepening the offshore renminbi liquidity pool, could sustain the momentum.
China’s own payment system, the Cross-Border Interbank Payment System (CIPS), is also gaining traction.
It expanded recently to cover more foreign banks including UOB, Bangkok Bank and First Abu Dhabi Bank.
For the first time, CIPS’ overseas participants cover offshore renminbi centres in Africa, the Middle East, Central Asia and Singapore.
These are set to increase renminbi settlements in China’s cross-border transactions, where the currency has already overtaken the dollar in recent years.
While the Chinese currency still accounts for just 2.2 per cent of global reserves, its share in China’s cross-border transactions has already overtaken the dollar.
In the nation’s goods trade, renminbi settlement stood at 26 per cent in May and could rise to 40 per cent by year-end, according to Mr Xing Zhaopeng, senior strategist at Australia & New Zealand Banking Group.
Still, China faces challenges. An economic slowdown, deflationary pressures and lower bond yields have complicated efforts to push the renminbi forward.
“On the fundamental level, wider international use of yuan rests on a robust economy and further progress in capital account convertibility,” Morgan Stanley economists led by Robin Xing wrote in a note last week.
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