However, in the longer term, Beijing must internationalise the yuan and continue with financial reforms if the currency is to gain greater acceptance for global trade
China has long been keen to promote the yuan overseas, as well as reducing its reliance on the US dollar, with the likes of Russia, Brazil and Bangladesh increasing their use of the currency.
China is ramping up efforts to boost the yuan’s appeal as an alternative in trade and as a reserve currency in the face of US dollar hegemony, while countries from South America to the Middle East have got on board with increased yuan use.
Bangladesh and Russia agreed to use the yuan to settle payment for a nuclear plant amid Beijing’s efforts to increase the use of the Chinese currency overseas and decrease reliance on the US dollar.
People’s Bank of China Governor Yi Gang also said the bank will seek to guide monetary policy so that real interest rates move slightly below the potential growth rate.
Malaysian Prime Minister Anwar Ibrahim said Xi Jinping welcomed discussion on reviving a decades-old idea for the establishment of an Asian monetary fund during a meeting in Beijing last month.
An increase in yuan settlements with the largest South American country shows how Beijing is trying to prevent China from being financially strangled amid US decoupling.
Prominent Chinese economist says banking authorities should implement a progressive tax on cross-border capital flows to guard against external risks that can slow the pace of financial liberalisation.
A further straining of relations between the United States and China threatens far-reaching implications for global trade that leaders on both sides are trying to guard against.
It comes as Indonesia’s rupiah, the Philippines’ peso and Malaysia’s ringgit all look set to struggle in the race to become Southeast Asia’s best-performing currency this year.
Bill Ackman, founder of US hedge fund Pershing Square Capital Management, is betting against the Hong Kong dollar, saying that the peg no longer made sense.
To encourage capital inflows, China’s foreign-exchange regulator points to ‘policy optimisations’ and other factors to reassure investors who have been waiting to see how the economic policy will unfold.
The share of Chinese trade settled in its currency has been gradually rising, with China’s ‘robust exports’ and strict capital controls seen to be contributing to the trend.
Bolstering the yuan’s use globally has been on Beijing’s agenda for years, and here’s why doing so remains essential to leadership’s plans.
People’s Bank of China says in a rare warning that stabilising the foreign exchange market is a top priority after the onshore yuan closed on Wednesday at its weakest level against the US dollar since January 2008.
A junta spokesman said the US dollar was being used ‘to bully smaller nations’. Other options Myanmar has discussed with Russia’s Vladimir Putin include the Indian rupee, ‘as well as the barter system’.
China’s onshore yuan opened at 7.0054 on Friday having last weakened to 7 per US dollar in July 2020, with analysts attributing the decline to the rapid strengthening of the US dollar.
Depreciation pressure on the yuan may constrain China’s ability to expand monetary policy in the second half of the year to shore up slowing economic growth, economists say.
China should take a lead role in creating international rules for digital currencies, which will increase global settlements using the yuan and loosen US dollar dominance, experts say.
The yuan breached 6.9 per US dollar for the first since August 2020 on Monday, but other Asian currencies have shown a sharper decline, ramping up risks for the region, analysts say.
Yuan could lose 5.5 per cent by 2030, further 7 per cent over next decade, more than 10 per cent a decade over time, with 53 per cent of its real value over 50 years – due to China’s industrialisation and environmental policies.
Yue’s warning, made last week before the July 1 handover anniversary, showed the unique position occupied by the world’s fourth-largest capital market, a quarter of a century since it ceased to be a British colony.
China’s yuan has fallen by 5 per cent against the US dollar in the last three weeks due to rising US interest rates, the war in Ukraine and a slowing domestic economy.
China’s yuan has been tumbling as fears grow about the economic impact of extended lockdowns in many Chinese cities and expectations for US interest rate rises.
Depreciation pressure on the yuan against the US dollar has intensified over the past two weeks amid more coronavirus-induced lockdowns across China.
China’s yuan has fallen by nearly 4 per cent against the US dollar this month, putting it on track for what could be its biggest drop since China unified exchange rates in 1994.
“The world’s attitude towards China … may well be affected by China’s reaction to our call for resolute action on Russia,” Treasury Secretary Janet Yellen says.
Beijing has been trying to insulate itself from a global financial system that is heavily tied to the US dollar, but strict capital controls still hinder the yuan’s use.