Beijing is building Shanghai into a major offshore yuan centre. Should Hong Kong worry?

For the better part of two decades, Hong Kong has served as the undisputed poster child for Beijing’s ambitions to internationalise the yuan.

But in a world increasingly defined by sanctions, frozen assets and fears of US dollar weaponisation, policymakers are beginning to confront a strategic question: can a single offshore centre shoulder the burden of the yuan’s global ambitions?

That question lies at the heart of Beijing’s latest efforts to expand Shanghai’s offshore finance role, reviving a long-running debate over whether mainland China’s financial hub is being groomed as an additional line of defence or a rival sibling – and whether Beijing intends to nurture both “children” equally, or if one will become its favoured darling.

“From Beijing’s perspective, it makes sense to develop multiple offshore yuan centres, whether in Hong Kong, Shanghai or Singapore,” said Shou Qi, who runs a private fund in Hong Kong, arguing that strengthening Shanghai’s role was a “smart move” amid geopolitical uncertainty.

“The target, I think, is definitely to promote internationalisation of the yuan, instead of diminishing Hong Kong’s status,” Shou added.

But some experts said that while Shanghai’s efforts to build an offshore yuan hub have, so far, made only limited inroads into Hong Kong’s dominance, concerns about competition between the two cities were unlikely to disappear.

“It’s obvious that the central government wants Shanghai – and even Shenzhen – to gradually develop offshore businesses as well,” said Chen Bo, senior researcher at the East Asian Institute of the National University of Singapore.