China eyes bigger global role for yuan as United States dollar stability questioned
China is stepping up efforts to internationalise the yuan, as growing doubts about the US dollar's stability provide a window of opportunity for the currency.
The People's Bank of China (PBOC) announced at its midyear meeting that it would expedite the yuan's use in trade settlement and cross-border financing.'[We'll] accelerate the expansion of the yuan's use in trade, further enhance its financing function and optimise policies governing funding pools and overseas listings of domestic companies,' the central bank said.
It also pledged to strengthen the offshore market and establish stable liquidity supply channels across a full range of maturities, while speeding up the development of overseas clearing banks through Beijing's yuan-denominated CIPS.
This marked the first time in three years that China's central bank has included a dedicated section on yuan internationalisation in its midyear meeting readout.
The statement aligns with Beijing's broader strategy to raise the yuan's global profile amid mounting concerns over US debt sustainability and rising geopolitical tensions, which have cast fresh doubt on the dollar's dominance.
Ray Dalio, the legendary investor who recently sold his remaining shares in Bridgewater Associates and stepped down from its board, issued a stark warning about the US economy last month. In a social media post, he cautioned that it could face an 'economic heart attack' unless the government reins in the deficit to 3 per cent of GDP.
Back in April, he argued that the old monetary order – in which countries like China produce goods cheaply and accumulate US debt while Americans borrow from those same countries to consume and pile up liabilities – was no longer sustainable.'Clearly, the monetary order will have to change in big disruptive ways to reduce all these imbalances and excesses, and we are in the early part of the process of it changing,' he wrote.
The yuan internationalisation index, released by Renmin University a week ago, rose by about 11 per cent in 2024 – further weakening the US dollar's dominance. The report's authors said the trend had given Beijing added leverage to push for reforms in the global monetary system and mitigate geoeconomic risks.
At the People's Bank of China meeting, held last Friday, the central bank reiterated its commitment to deeper participation in global financial governance and shaping international financial rules.
It highlighted its efforts in institutionalising cooperation between the Chinese and European Central Bank governors through an annual meeting mechanism, as well as promoting collaboration under the China-EU financial working group.
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