China must loosen capital curbs to boost international use of yuan, says former bank executive

China needs to increase international use of its currency so that it can lift the yuan’s share of international payments, according to a former senior executive at one of China’s big four banks.

Despite China’s growing influence in the global economy and trade, there is a “big gap” when it comes to the use of the yuan in foreign trade, investment, and financial transactions, said Wang Yongli, a former vice-president with the Bank of China and a former board member for Swift, the international financial payments system.

Wang’s arguments, made in a newspaper article, come amid growing concerns in China that the US will freeze institutions and individuals out of the dollar payments system.

Following the introduction of a national security law in Hong Kong, Washington said it would penalise individuals who helped undermine the city’s autonomy and punish Chinese financial institutions that continue to do business with them.

The yuan currently accounts for only 2 per cent of international payments by value, but Wang argued that this figure should pass 10 per cent in the next decade.

“The internationalisation of the yuan needs to be further accelerated,” Wang wrote in the Beijing-based newspaper The Economic Observer on Saturday, adding that the promotion of the yuan in international transactions is now an “increasingly urgent and important strategic issue” because “global powers are shifting from cooperation to confrontation” with China in financial matters.

“Of course, while the coronavirus pandemic has accelerated the profound changes in the world order, it has also further aggravated the conflicts among major countries.