China is accelerating efforts to push the yuan deeper into global financial markets.
By promoting cheaper yuan financing and expanding offshore access, reports Bloomberg, the People’s Bank of China (PBOC) aims to turn the renminbi into a go-to funding currency worldwide.
This strategy hinges on attractive borrowing conditions and greater use of yuan-denominated products, positioning the currency for broader international use even as China maintains capital controls.
With rising issuance of panda bonds and cross-border yuan loans, the push marks Beijing’s most assertive move yet in reshaping the global monetary landscape in its favour.
Beijing focuses on global access to yuan funding
In its annual report released on 30 October, states Bloomberg, the PBOC outlined a focused strategy to promote the yuan as a funding currency across global markets.
The plan includes greater support for yuan-based instruments such as loans, panda bonds, offshore bonds, and trade finance products.
This reflects a clear intent to support international institutions and companies seeking access to yuan liquidity, despite China’s existing controls on outbound capital flows.
The yuan’s appeal as a funding currency has grown significantly due to China’s relatively loose monetary stance and ongoing deflationary pressure.
Bond yields in China have remained lower than those on US Treasuries, making yuan borrowing more cost-effective for global investors and companies.
Growing use of yuan in global trade and debt issuance
According to Bloomberg, data from SWIFT shows the yuan becoming the second most-used global currency in trade finance in September, accounting for 7.3% of all settlements.
This signals rising international trust in yuan transactions, especially in regions where geopolitical uncertainty has prompted concerns over dollar stability.
The offshore yuan debt market is also expanding. In 2024, overseas issuers raised approximately 1.4 trillion yuan ($197 billion) through panda and dim sum bonds.
Simultaneously, yuan-denominated loans issued by Chinese commercial banks to foreign borrowers totalled 2 trillion yuan by year-end, showing a 14% increase year-on-year.
Countries including Hungary, Kazakhstan, and Kenya have turned to yuan borrowing to finance infrastructure and development projects.
This aligns with China’s broader strategy to integrate its currency into global development finance, especially through initiatives like the Belt and Road.
Offshore yuan liquidity pool continues to deepen
Currency swap agreements have played a key role in expanding yuan access. Central banks in Hong Kong, Turkey, and South Korea frequently use these swap lines to facilitate trade settlement and yuan liquidity.
The growth of panda bond issuance has helped build a stable pool of offshore yuan, making it easier for foreign borrowers to tap the currency without relying on mainland capital markets.
As per Bloomberg, UK-based fintech firm Ebury is now expanding its workforce in China to meet rising demand for yuan settlements.
This shows that foreign firms are preparing to facilitate more cross-border yuan transactions, especially as Chinese companies broaden their global supply chains.
Yuan expansion linked to geopolitical risk management
Beijing’s push to globalise the yuan is also about risk mitigation. By reducing dependency on the dollar, China aims to shield its financial system from external shocks and volatile US policy moves.
This is particularly relevant amid recent turbulence in global markets, where dollar dominance has occasionally introduced instability for emerging markets.
The PBOC’s strategy includes aligning the growth of yuan financing with the expansion of Chinese industrial networks abroad.
With Chinese firms increasing overseas production, a rising volume of trade and investment transactions are expected to be settled in yuan, further boosting demand for the currency.
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