Global use of yuan to be expanded

China is likely to press ahead with expanding the global use of the yuan in a gradual and prudent manner during the 15th Five-Year Plan period (2026-30), while continuing to foster a sound environment for using and holding the Chinese currency, officials and experts said.

As the dollar-centered international monetary system appears increasingly fragile, efforts to raise the yuan's global profile are seen as essential not only for safeguarding China's financial security but also for enhancing the resilience of the global monetary framework, they said.

Future reforms, they added, should focus on broadening capital market access for global investors with a more integrated framework, deepening capital account liberalization under prudent oversight, and enhancing exchange rate flexibility to support the stable, long-term internationalization of the yuan, or the renminbi.

The People's Bank of China, the country's central bank, said that China will continue to improve the environment for both domestic and overseas entities holding and using the yuan, as the cross-border use of the renminbi is a natural process.

"As the pace of diversification in the international monetary system accelerates, business entities are showing a stronger endogenous demand for using the yuan," it said.

Efforts will be made to integrate investment channels to attract more overseas investment in the onshore financial market, refine renminbi settlement policies for cross-border trade and investment, and encourage more qualified overseas institutions to issue panda bonds — yuan-denominated bonds sold in the onshore market by overseas entities, it added.

China is likely to map out the path for expanding high-level opening-up during the ongoing fourth plenary session of the 20th Communist Party of China Central Committee, where draft proposals for formulating the 15th Five-Year Plan for national economic and social development are being studied.

President Xi Jinping highlighted the Chinese currency's heft as a core element of the country's financial strength in early 2024. Later last year, the resolution adopted at the third plenary session of the 20th CPC Central Committee stressed that the country should steadily and prudently advance the internationalization of the yuan while promoting high-standard opening-up of the financial sector.

Experts said the fourth plenary session may reaffirm the steady and prudent advancement of renminbi internationalization as one of the key tasks during the 15th Five-Year Plan period.

Guan Tao, global chief economist at investment bank BOCI China, said, "China needs to advance the gradual opening of the capital account to further facilitate the cross-border circulation and use of the yuan."

Generally speaking, the capital account records the net flow of investment into an economy.

Guan added that future opening steps are likely to follow a cautious and gradual approach, reflecting China's long-standing principle of moving forward step by step to ensure both safety and progress.

Marshall Mills, the International Monetary Fund's senior resident representative in China, said, "As China's role in the global economy and trade continues to grow, we expect the international use of the yuan to grow."

Mills emphasized that the yuan's increasing use globally is a market-driven outcome.

Marking renminbi internationalization as a defining hallmark of China's financial opening-up, Wu Xiaoqiu, dean of the National Academy of Financial Research at Renmin University of China, said, "If a country's legal tender lacked global influence, the notion of great financial strength would be untenable."

Wu said that further opening the capital market is a priority for enhancing the global appeal of the renminbi. He suggested expanding treasury bond issuance — including replacing local government debt — to increase the supply of risk-free renminbi assets for global investors.

Tian Xuan, president of Tsinghua University's National Institute of Financial Research, said that the next phase of China's capital market opening-up should focus on improving cross-border investment frameworks and expanding overseas institutions' access to onshore derivatives trading, such as futures on treasuries and stock indexes.

zhoulanxv@chinadaily.com.cn