China’s central banker remind the global markets that the yuan’s challenge to the US dollar is still very much on

People’s Bank of China Governor Yi Gang said that promoting broader use of the yuan will continue alongside the opening of markets

Policymakers will remove obstacles that stand in the way of broader use of the currency with steady liberalisation of the capital account, increasing yuan exchange-rate flexibility and improving liquidity in the bond market, another official said

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A bank clerk counts 100 yuan banknotes at a branch of the Industrial & Commercial Bank of China (ICBC) in Beijing on April 13, 2016. Photo: Reuters

Published: 11:13am, 6 Nov 2020Updated: 12:10pm, 6 Nov 2020

Investors wondering how China plans to evolve its financial markets in the coming years need look no further than the commentary from the weekend’s Bund Summit in Shanghai for guidance.

People’s Bank of China governor Yi Gang said that promoting broader use of the yuan will continue alongside the opening of markets. “The regulator’s main job is to reduce restrictions on the cross-border use of the currency, and let it take its own course,” he said.

Those comments were echoed by Zhu Jun, director general of the central bank’s international division. Policymakers will remove obstacles that stand in the way of broader use of the currency with steady liberalisation of the capital account, increasing yuan exchange-rate flexibility and improving liquidity in the bond market, she said.

The comments by the two officials are a reminder that even though promoting the yuan hasn’t taken off as rapidly as expected since the idea was kicked off a decade ago, monetary officials are pressing ahead anyway. Success would give Chinese policymakers some things they’ve long dreamed about: the use of the yuan as a global reserve currency and a challenge to the US dollar’s dominance in trade and finance.

“China will stick to its goal of yuan internationalisation and there is no going back from its financial opening up,” said Gao Qi, a strategist at Scotiabank in Singapore. “More and better policies are likely to be seen to accelerate the internationalisation.”

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