China’s yuan could become world’s ‘currency of choice’ by 2050 under dual circulation plan

dual circulation plan,, China’s dual circulation plan, yuan internationalisation

Amid rising anti-globalisation sentiment and as Western countries intensify their efforts to contain China, the country is entering a period of economic development that will create new infrastructure to enable the global use of the yuan, according to a former deputy governor of its central bank.

As China’s economy integrates with the rest of the world, market entities will use the yuan for cross-border purposes, although under the so-called dual circulation plan, yuan globalisation is ultimately aimed at serving China’s real economy, trade and investment, said Export-Import Bank of China chairman Hu Xiaolian.

“Now that China is developing a new paradigm characterised by its dual circulation model, the globalisation of the yuan has an even more solid foundation,” Hu said.

“At the end of the day, it is about serving China’s dual circulation model while promoting closer cooperation with the rest of the world.”

China’s dual circulation plan places a greater focus on the domestic market, or internal circulation, and is China’s strategic approach to adapting to an increasingly unstable and hostile outside world. It is expected to see China place less reliance on its export-oriented development strategy, or external circulation, without abandoning it altogether.

For the time being, yuan internationalisation is still at its early stage and oriented toward meeting the import payment needs of China’s domestic market.

The transition into a new stage of yuan globalisation will be dependent upon a deeper and broader opening up of China’s financial markets, the realisation of a convertible capital market, as well as closer ties between China and the rest of the world, Hu added.

Under its 14th five-year plan, China is aiming to build a multilayered capital market, and develop the links between domestic and overseas capital markets, which supports the inbound flows of overseas yuan and provides foreign entities a smoother channel for investment and financing.

By the middle of this century, China might have the world’s biggest, and most open financial market to function with the world’s most inclusive rules and norms promoting international cooperation

Hu Xiaolian

“By the middle of this century, China might have the world’s biggest, and most open financial market to function with the world’s most inclusive rules and norms promoting international cooperation,” Hu said. “By that time, the yuan is likely to be the currency of choice and could be freely used, serving global trade and investment as it becomes a reliable and trustworthy currency.”

Overseas entities held 3.4 trillion yuan (US$531 billion) in yuan-denominated equities and 3.3 trillion yuan in yuan-denominated bonds at the end of last year, up 62 per cent and 47 per cent from the previous year, respectively.

Meanwhile, green financing, including green bond issuance and the launch of China’s carbon trading market at the end of this month, will also bring new opportunities for yuan internationalisation, according to Hu.

China’s adoption of new policies to develop its domestic consumption market will provide it with a buyer’s advantage to support yuan-denominated cross-border transactions given the nation’s huge population and growing incoming levels, he said.

Instead of being driven by financial speculation in the offshore market, China places an emphasis on a stable exchange rate combined with stable macro economic and monetary policies, and this will boost confidence in the yuan and help foreigners accept the currency for its payments, Hu said.

Wang Jiang, a professor of finance at the MIT Sloan School of Management, said increasing foreign investment into Chinese government bonds will be an important factor in the allocation of global resources during the process of yuan internationalisation under the context of China’s dual circulation strategy.

China’s government bonds are not only an investment instrument, they can also reflect the price of foreign investment and thus provide a guide in the allocation of resources, explained Wang.

For example, falling interest rates on government bonds could actually stimulate China’s consumption and provide guiding information on market expectations of inflation, while at the same time leading to a deeper change in the allocation of resources.

“Government bonds are not only a way to borrow debt, but it is also a way to guide the allocation of resources,” Wang said. “So it should be seen from an infrastructure point of view, we should improve the efficiency and optimise the structure of government bonds.”

News Related

OTHER NEWS

China's smartphone market cools in second quarter as Huawei drops out of top five vendor rankings

Smartphone shipments in mainland China declined 17 per cent in the quarter ended June, as the void left in the market by US-blacklisted telecommunications giant Huawei Technologies Co could not ... Read more »

BTS make history again as songs Butter and Permission to Dance take turns at No 1 on Billboard's Hot 100 chart

Hardly a day goes by without BTS making history, and the K-pop superstars have done it yet again. A few weeks ago, the seven-member Korean boy band hit No 1 ... Read more »

How anyone can build exceptional relationships: ‘touchy feely' advice from Stanford professors

The ability to create strong relationships with others is crucial to living a full life and becoming more effective at work. Many of us, however, struggle to build solid connections, ... Read more »

Four Hong Kong restaurants with chef's counters where diners get to see ‘the dance' of kitchen staff in action – and the occasional mistake

Venezuelan-born chef Ricardo Chaneton tells of the time a compatriot started crying in front of him at Mono, his contemporary Latin American restaurant in Hong Kong. The diner, who had ... Read more »

Hong Kong restaurant reviews: Casa Cucina – a short menu of filling, homely Italian classics

Casa Cucina is everything you could ask for in a neighbourhood restaurant – a warm, welcoming and friendly vibe, delicious food at reasonable prices, and a comfortable environment. Too bad ... Read more »

Investors are getting rid of real estate; aviation starts decline | Financial

The AEX index trades 0.5% in the minus at 754.3 points around a quarter past twelve after having touched a record position the day before. The Midkap index falls 1.2% ... Read more »

On takes off: sports shoe brand co-owned by Roger Federer wins over pro runners and the public with its unique tubular cushion sole

Peter Rea signed a sponsorship deal with Swiss sports brand On in 2018 after more than a decade coaching runners in Reebok sneakers. “People were like, ‘Wait, who’s On?’,” recalled ... Read more »

Why stock market investing today is like flying in the 1950s

Most stock markets indices don’t want to go down. For a Hong Kong dollar investor, Mumbai is up 111 per cent since the Covid-19 low, the S&P 500 is up ... Read more »

BMW chases China car smugglers across Canada, their trail strewn with fake documents, bogus bank accounts

On April 15, a young man walked into a BMW dealership in Markham, Ontario, and signed a lease on a new X7 SUV, taking delivery of the C$140,000 (US$112,000) vehicle ... Read more »

Tech hub of Shenzhen drafts first rules in China guaranteeing kindergarten access amid private tutoring crackdown

China’s southern tech hub of Shenzhen, picked by Beijing to become a model socialist city, is drafting the country’s first detailed rules that would guarantee access to kindergarten, offering a ... Read more »

Mirror star Keung To on giving Hong Kong people confidence, song-making and how he started dreaming of being a singer

Strange warnings emerged on social media last month that a shopping centre in Tuen Mun, in Hong Kong’s New Territories, would be submerged, but instead of spreading fear the rumours ... Read more »

SPACs face ‘crowded' market for deals after blistering fundraising push this year, Hong Kong investment firm says

Special purpose acquisition companies (SPACs) are facing a congested market for potential merger targets – particularly those seeking technology unicorns – after an eye-popping amount of fundraising in the first ... Read more »

China's job scarcity sees fresh grads shun private sector for stable civil service jobs, as ‘government is too big to fail'

This is the fifth in a series of stories on China’s job market, looking at its history, the role of migrant workers, inequality and the future for its graduates entering ... Read more »

From Korean at Hansik Goo to a tasting menu at Neighborhood, via care packages during Hong Kong quarantine, my July was a feast of good eating

July was a record month for me: I ate out only twice. In normal times, it’s more like twice a week, at least. Don’t feel sorry for me, though: just ... Read more »

4 Olympic athletes who love K-pop: BTS, Blackpink and Mamamoo are all on these Korean sports stars' pre-competition playlists

This summer, Olympic athletes have not only grabbed the attention of sports fans but also that of K-pop fans, as they share a sense of unity around their love for ... Read more »

Covid has hit over 500 factories

About 1,500 workers at a textile factory in Nonthaburi province during their strike late last month, when they demanded management conduct mass Covid-19 testing after about 60 of their colleagues ... Read more »

No problem with big tech, if you only look at the numbers

Financially, they are all success stories. But the major changes that governments and regulators are working on can put considerable pressure on the business models of the groups. One or ... Read more »

Nongshim to raise prices of its instant noodle products

Photo by: Nongshim/Facebook Nongshim, one of the most popular instant noodle brands in South Korea, just announced this week that it will be raising the prices of its products. The ... Read more »

Andreessen-backed start-up to sell US$300,000 electric boats built by former rocket engineers

Arc, a start-up with a deep bench of former SpaceX employees, is entering the fledgling market for electric boats with a US$300,000, 475-horsepower pleasure craft. The Los Angeles-based company plans ... Read more »

Will the Delta variant derail Asia's economic recovery?

Worries about the spread of the highly transmissible Delta variant of Covid-19 has unnerved markets recently, given its potential to disrupt the global economic recovery. Jitters have focused on Asia, ... Read more »

Top 7 Furniture Choices For First-time Buyers

Everyone has a few important first-times in their life. First-time cycling, a first interview, a first job, a first house, etc. Following this, everyone will agree that first times are ... Read more »

Cross-border SaaS provider Keyouyun bags exclusive angel investment from Hangzhou Raycloud

Keyouyuan provides SaaS solutions to global e-commerce merchants that use platforms like Shopee, Lazada, Amazon, eBay, and Shopify. Read more »

Riskified's share price soars on IPO day, firm targets Asia in global expansion

General Atlantic-backed Riskified raised more than USD 367 million in an IPO on the NYSE less than a decade since its founding in Tel Aviv. Read more »

Video call startup Baijiayun's valuation hits RMB 3 billion following Series C financing from VMCapital

The ambitious video service provider wants to be the Chinese answer to Zoom, according to founder Li Gangjiang. Read more »

NCSoft announces ‘Blade & Soul 2' launch date

Photo by: NCSoft NCSoft is launching “Blade & Soul 2,” and the South Korean video game developer and publisher based in Seongnam already set the date. The company announced that ... Read more »

SoftBank confronts renewed China risk as Didi backfires

Beijing’s crackdown on US-listed tech stocks spells trouble in vital market. Read more »

Boeing cancels layoff plans as revenue starts to increase

Photo by: Boeing/Facebook Boeing will not lay off its workers anymore and this change of plans stemmed from the fact that the company saw increased revenue in the second quarter. ... Read more »

Test for entry system is hardly used, but costs €1m a day: VK

People waiting for a ‘test for entry’ test. Photo: DutchNews.nl The much criticized ‘test for entry’ system may be virtually dormant since clubs were closed again, but the 11 companies ... Read more »

Cancer charity to support independent probe into Tata Steel pollution

The IJmuiden plant at night. Photo: Tata Steel Dutch cancer charity KWF Kankerbestrijding is supporting the independent survey into Tata Steel and its impact on air quality set up by ... Read more »

Huawei's latest flagship phone comes with HarmonyOS but doesn't support 5G due to US sanctions

Chinese telecommunications equipment giant Huawei Technologies’ latest flagship smartphone does not support 5G connections as the company continues to lose relevance in the mobile phone market under Washington’s ban on ... Read more »

AEX steps on the brakes after winning streak; aviation in demand | Financial

The AEX index is down 0.6% at around a quarter past nine at 753.27 points after having touched a record position the day before. The Midkap index falls 0.7% to ... Read more »

Hong Kong regulators are reviewing appointment of State Street as Tracker Fund manager, sources say

Hong Kong regulators are reviewing the appointment of the manager of the city’s Tracker Fund to make sure local investors’ interests are well protected against any negative effects from a ... Read more »

AEX sinks under pressure from tech; good job Brunel | Financial

The AEX index is down 0.7% at around a quarter to ten at 752.97 points after having touched a record position the day before. The Midkap index falls 0.9% to ... Read more »

Hong Kong's US$700 billion July market sell-off evokes memories of China's 2015 stocks rout

Cathie Wood’s US$25.5 billion flagship investment fund began 2021 as one of the most enthusiastic, and biggest portfolio investors of Chinese technology companies listed in Hong Kong and the United ... Read more »

Fund manager nurses losses in China stocks after making a ‘mistake' in underestimating impact of education crackdown

The founder of Hong Kong’s Brilliance Asset Management said he made a mistake in underestimating the impact of Beijing’s reforms in the education sector, but struck an optimistic note about ... Read more »

Women's Festival Hong Kong offers expert advice on staying positive amid the coronavirus pandemic, dealing with bereavement and more

The Women’s Festival Hong Kong has built a reputation for its bold programming and this year, the fourth edition, it doesn’t disappoint. Acknowledging that we’ve all faced challenges over the ... Read more »

Corona concerns and dampers in quarterly figures weigh on Japanese stock market | Financial

Tokyo’s leading Nikkei went 1.8 percent lower into the weekend at 27,283.59 points, touching the lowest level since January 6, 2021. In July, the Japanese main index fell about 5 ... Read more »

‘AEX is slowing down after record hunt with a view to aviation' | Financial

Despite the relaxation of the corona measures, the French-Dutch aviation combination still suffered a significant loss. Real estate fund WDP and stainless steel maker Aperam also came up with figures. ... Read more »

Israel discovers links between Pfizer COVID vaccine and heart inflammation in young men

Israel’s Health Ministry said on Tuesday it had found a small number of heart inflammation cases, observed mainly in young men who received Pfizer’s COVID-19 vaccine in Israel, were likely ... Read more »

Tesla says it will stop accepting Bitcoin for car payments over environmental concerns

Electric car maker Tesla will stop accepting Bitcoin as payment, CEO Elon Musk tweeted on Wednesday, citing environmental concerns. “We are concerned about rapid increasing use of fossil fuels for ... Read more »