China eyes bigger global role for yuan as US dollar stability questioned

China is stepping up efforts to internationalise the yuan, as growing doubts about the US dollar’s stability provide a window of opportunity for the currency.

The People’s Bank of China (PBOC) announced at its midyear meeting that it would expedite the yuan’s use in trade settlement and cross-border financing.

“[We’ll] accelerate the expansion of the yuan’s use in trade, further enhance its financing function and optimise policies governing funding pools and overseas listings of domestic companies,” the central bank said.

It also pledged to strengthen the offshore market and establish stable liquidity supply channels across a full range of maturities, while speeding up the development of overseas clearing banks through Beijing’s yuan-denominated Cross-border Interbank Payment System (CIPS).

This marked the first time in three years that China’s central bank has included a dedicated section on yuan internationalisation in its midyear meeting readout.

The statement aligns with Beijing’s broader strategy to raise the yuan’s global profile amid mounting concerns over US debt sustainability and rising geopolitical tensions, which have cast fresh doubt on the dollar’s dominance.

Ray Dalio, the legendary investor who recently sold his remaining shares in Bridgewater Associates and stepped down from its board, issued a stark warning about the US economy last month. In a social media post, he cautioned that it could face an “economic heart attack” unless the government reins in the deficit to 3 per cent of GDP.

South China Morning Post