China’s yuan internationalisation strategy needs ‘persistent, strong foreign demand’

China should focus on increasing the soft power of the yuan as part of its internationalisation strategy, rather than looking solely at the liberalisation of its restrictions on the capital account, according to a senior government adviser.

Renmin University vice-president Liu Yuanchun said China should look to drive demand for yuan-denominated assets to support internationalisation.

“The strategic adjustment is not to turn to the capital account, nor make it fully open,” he told a closed-door lecture organised by the Institute of Finance under the Chinese Academy of Social Sciences this week.

“Instead, it should aim to generate persistent and strong foreign demand for the yuan by enlarging the domestic market and increasing the pricing power of key technologies.”

On Saturday, Renmin University will release its yuan internationalisation index, which measures popularity of the currency in trade, investment, payment, foreign exchange trading and central bank reserves.