Why is China’s yuan-internationalisation push failing to meet expectations?

Beijing has been trying to get more countries to use its currency for years, but until these hurdles are cleared, the yuan’s rise as an international currency ‘will have a ceiling’

Analysts, economists and monetary officials weigh in on what still needs to be done, and Hong Kong could play a key role

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To reduce its dependency on US dollars, China has long been keen on increasing the yuan’s use overseas. Photo: Reuters

Published: 10:00pm, 9 Jun 2023Updated: 9:19am, 12 Jun 2023

Beyond trade, conducting more financial market deals in China’s currency would be a critical step toward Beijing’s goal of boosting overseas use of the yuan, and the financial hub of Hong Kong should play a vital role toward that end, monetary officials and economists said on Friday.

“The internationalisation of the yuan has come a long way, but until now, everyone still feels that it has not met our expectations,” said Wang Yongli, general manager of China International Futures, at a panel discussion during the Caixin Summer Summit in Hong Kong.

Wang pointed out that the yuan’s use abroad has mainly been relegated to payments and trade settlements.

“But the internationalisation of a currency is not just about trade. Whether it can be used to denominate and settle in massive financial transactions is a very important indicator,” said the former vice-president of the Bank of China and a former board member for Swift, the international financial payments system.

“If the yuan cannot be widely used in financial markets, its achievement as an international currency will have a ceiling.”

To reduce its dependency on US dollars, the world’s second-largest economy has long been keen on increasing the yuan’s use overseas, and Russia’s invasion of Ukraine last year served to accelerate that process, as Western sanctions on Moscow showed how devastating it can be to depend on the dollar.