China Is Stepping Up Push to Make Yuan a Global Currency

China has announced a new set of measures aimed at expanding the international use of the yuan while strengthening its ability to manage financial risks as the world’s second-largest economy undergoes a difficult economic transition.

At the annual Lujiazui Forum in Shanghai today, China’s top financial officials pledged to further open the country’s markets in a cautious manner as Beijing shifts its growth model away from property and traditional investment towards technology, innovation and emerging industries.

“As financial markets continue to deepen and develop … cross-market risk contagion may become more frequent,” said Pan Gongsheng, governor of the People’s Bank of China (PBOC), pledging to prevent systemic risks as China “continues to integrate into the global financial system”.

The central bank governor said six major state-owned lenders, including Bank of China and China Construction Bank, had been authorised to conduct offshore yuan transactions in Shanghai’s free trade zone as part of efforts to expand the city’s role as a hub for offshore yuan business.

The PBOC also introduced a new liquidity facility, known as the FIMA RMB Repo, designed to allow overseas central banks and sovereign wealth funds to access yuan liquidity using high-quality Chinese bonds as collateral.

“Foreign investors including central banks are actively entering China’s bond market, and their need to manage liquidity is also rising,” Pan said.

China has accelerated efforts to internationalise the yuan as Beijing seeks to reduce its reliance on a global financial system dominated by the US dollar.

Pan’s comments came a day after the PBOC’s digital yuan operation centre signed direct participant agreements with 26 financial institutions in Shanghai to encourage wider adoption of the digital currency, also known as the e-CNY.

The push comes as China attempts to expand the yuan’s role in international trade and finance while maintaining tighter control over capital flows.

In domestic markets, Pan said the central bank would expand its range of overnight reverse repo operations to improve liquidity management.

The PBOC is also studying a liquidity support mechanism for non-bank financial institutions during periods of stress, while attempting to balance financial stability with concerns over “moral hazard”.

Pan said slower loan growth in recent years, alongside steady increases in bond and equity financing, reflected a deeper transformation in China’s economic structure.

“This structural change reflects the “profound economic restructuring and a shift in growth engines” underway, he said.

“It’s difficult and unnecessary for China’s credit growth to maintain its previous pace,” he said.

Marco Sun, chief financial market analyst at MUFG China, said the role of China’s central bank was evolving.

“In the past, the PBOC functioned more as the ‘central bank of the banking system,'” Sun said. “In the future, the central bank cannot limit itself to managing the banking system; it must also more directly manage market liquidity, the cost of capital, and financial market stability.”

Chinese stocks showed little reaction to the announcements on Wednesday, while the yuan remained broadly stable.

At the same forum, Ding Xiangqun, the newly appointed head of China’s National Financial Regulatory Administration, said regulators would work to prevent systemic risks while directing capital towards emerging industries.

“In recent years, cross-border transmission and cross-market spread of financial risks have become increasingly pronounced,” Ding told the annual Lujiazui Forum in Shanghai.

Regulators would “encourage institutions to raise capital through multiple channels to enhance their risk resilience,” he said.

China’s economy has become increasingly divided between weak consumer demand and a struggling property sector on one side, and rapid expansion in areas such as robotics and artificial intelligence on the other.

Official data showed retail sales in May fell for the first time in more than three years and investment weakened, although industrial output accelerated.

Ding said regulators would guide financial resources towards future industries while increasing oversight in emerging sectors.

Authorities would also crack down on disorderly competition and illegal financial activities, he said.

China’s foreign exchange regulator said it planned to issue fresh quotas under the Qualified Domestic Institutional Investor (QDII) scheme, allowing approved domestic investors to invest more overseas.

The move highlights Beijing’s efforts to channel outbound capital through regulated routes following a crackdown on what authorities described as illegal cross-border investments in late May.

China’s securities regulator, Wu Qing, said the country’s stock market would “actively embrace” the technological revolution while strengthening measures against speculation and market manipulation.

The announcements reflect Beijing’s broader challenge: opening China’s financial system further to global investors while maintaining control over risks during one of the country’s most significant economic transitions in decades.

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