China tweaks global yuan strategy in signal of growing caution

China has tweaked one word in its policy to internationalise the yuan, a change that analysts see as a sign of Beijing’s new-found caution in promoting the international use of the currency.

In a communique outlining the country’s next five-year plan for 2021-25, China’s Central Committee said it would “steadily and prudently” promote the internationalisation of the yuan, a change from the previous wording that only included “steadily”.

The slight adjustment, from Wenbu to Wenshen in Chinese, showcased Beijing’s growing concern about risks stemming from cross-border capital flows, even though China remains committed to boosting use of the yuan in international trade and investment, analysts said.

Zhang Yuyan, a researcher at the Chinese Academy of Social Sciences, said at a press conference this week China was trying to be “prudent” about the yuan’s global push because it related to exchange rate liberalisation, capital market opening and “financial security”.

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What happened at the Chinese Communist Party’s major policy meeting, the fifth plenum?

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“But China still has to go ahead. If you think China will be conservative or even stop the process of yuan internationalisation, you are wrong,” he said.