China-US tensions drive Beijing’s push of yuan in belt and road nations, but challenges remain

China is stepping up efforts to internationalise the use of the yuan in Southeast Asian nations taking part in its Belt and Road Initiative

Despite growing China-Asean trade, use of the yuan in global trade is limited and its share of currency reserves is still below 2 per cent

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China is stepping up efforts to reduce a reliance on the US dollar for bilateral trade with countries across the region. Photo: Xinhua

Published: 7:15pm, 12 Jun 2020Updated: 10:58pm, 12 Jun 2020

Amid growing tensions between China and the United States, Beijing is renewing its push to internationalise the use of the yuan in Southeast Asia under its globe-spanning belt and road infrastructure drive.

China is stepping up efforts to reduce a reliance on the US dollar for bilateral trade with countries across the region, from Cambodia to Vietnam, as friction with Washington causes uncertainty in trade and financial markets for the world’s second largest economy.

Cambodian computer distributor Yako Technology this week conducted the first direct foreign exchange transaction between the riel and the yuan through Bank of China Hong Kong in Phnom Penh, the Chinese bank said in a statement.

The money was transferred to Yako’s exporter account in China, with the settlement made through Bank of China Hong Kong in Guangxi, an autonomous region in southern China. In the past, Cambodian customers had to exchange riel into US dollars before changing into yuan.

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Guangxi, which borders Vietnam, is China’s window for cooperation with Asean nations, which are an important part of the Belt and Road Initiative.

The region’s total cross-border yuan settlements exceeded 1 trillion yuan (US$142 billion) as of August in 2019.

China’s biggest payment apps WeChat Pay and Alipay have been making inroads in Cambodia, making it easier for Chinese tourists to spend money in the country.