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Opinion
Markets, not politics, will make China’s yuan a global currency
Until authorities can reduce costs and allay the market’s concerns, yuan internationalisation will be stronger on paper than balance sheets
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Tan Poh Hwee is president of the Asia Academy of Digital Economics, a Singapore-based non-profit, and a corresponding fellow of the National Academy of Artificial Intelligence.
The yuan’s next global push will fall short if it is treated as persuasion. The test is not whether Beijing wants an international currency or whether Hong Kong can host summits around it. It is whether a treasurer in Jakarta, a bank in Riyadh or a Gulf central bank can fund, hedge, invest and exit yuan positions at a predictable cost. Until then, yuan internationalisation will look stronger in policy papers than on balance sheets.
Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue Wai-man is right to put yuan internationalisation at the centre of Hong Kong’s financial agenda and to highlight liquidity and direct conversion costs. These are not technical details. They are the language of market doubt, asking why the yuan can be used to settle invoices yet still be avoided in financing, reserves and risk management.
The progress is real, but so are the limits. Hong Kong’s yuan deposits reached 1.13 trillion yuan (US$166.3 billion) at the end of May, with monthly cross-border trade settlement remittances above 1.12 trillion yuan. In May, however, the yuan accounted for only 2.75 per cent of global payments by value on the Swift international payment system, while the US dollar took 50.73 per cent.
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