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Xinyi Wu

Faltering confidence in the US dollar has handed China a “golden window of opportunity” to promote the global use of its currency, according to a former head of the Chinese central bank.
“The core driving force behind the current changes in the international monetary system is the United States’ own policy choices,” Zhou Xiaochuan was quoted as saying in a report published on Sunday by the New Economist, a Chinese think tank.
He cited the broad application of American tariffs, the frequent use of the dollar in sanctions, and geopolitical conflicts as factors that have eroded the US currency’s global credibility.
Meanwhile, the yuan is facing appreciation pressure as capital flows back into China, Zhou added.
“The current period is a golden window of opportunity for promoting the internationalisation of the renminbi,” Zhou was quoted as saying at the Shanghai Currency Forum earlier this month, using the official name of China’s currency.
Zhou, who was the longest-serving governor of the People’s Bank of China, having held the position from 2002 to 2018, laid the foundation for the yuan to go global by officially introducing it for cross-border trade settlements in 2009.
Addressing key theoretical hurdles to the yuan’s internationalisation, Zhou argued that China’s trade surplus was not a barrier to currency exports, as the yuan could still be supplied to global markets via capital accounts and foreign loans. He also suggested that China did not need to match the massive debt issuance of the US to be successful, as actual global demand for reserve currencies is far lower than the total stock of US Treasuries.

Nonetheless, a supply of safe, convertible and liquid assets remains crucial for yuan internationalisation, Zhou noted.
“While China’s government bond market has gradually opened up, the supply scale and investment convenience of safe assets still need improvement,” he said.
He emphasised that a strong alternative to the dollar was unlikely in the short term, despite recent challenges to its dominance, given the relatively low current pace of yuan internationalisation.
“[We should] seize this favourable opportunity to steadily advance reform and opening up … so that the internationalisation of the renminbi is commensurate with China’s economic strength,” Zhou said.
He suggested enhancing the free usability of the yuan and its capital account convertibility, avoiding excessive regulation, improving cross-border financial infrastructure for the yuan, and promoting international financial centres such as Shanghai.
Beijing recently undertook the first major update to business rules governing the Cross-border Interbank Payment System (CIPS), China’s alternative to the dominant US-led global financial infrastructure.
In the revised regulations, which came into effect in February, the CIPS added the offshore yuan into its mandate and broadened participation for financial institutions, while leaving room for it to be compliant with multicurrency settlements.


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Zhou Xiaochuan, who laid the foundation for China’s currency to go global, says Beijing can capitalise on changes in the international monetary landscape


Zhou Xiaochuan, who laid the foundation for China’s currency to go global, says Beijing can capitalise on changes in the international monetary landscape.


Yuan’s ‘golden window’ is open, former PBOC governor says as US dollar credibility teeters

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Zhou Xiaochuan, who laid the foundation for China’s currency to go global, says Beijing can capitalise on changes in the international monetary landscape

Zhou Xiaochuan, who laid the foundation for China’s currency to go global, says Beijing can capitalise on changes in the international monetary landscape