The yuan is expected to play a greater global role and to do this China plans to further open up its market and promote free global trade and investment.
According to the central bank governor Zhou Xiaochuan, China has done most of what it takes to pave this way. The comment has been released Friday with the first session of the 13th National People’s Congress.
The Chinese commitment to making the yuan a market leader has begun from the piloting of RMB settlement in cross-border trade in 2009 and picked up pace in 2016 when the IMF included the yuan in the basket of currencies that make up the Special Drawing Right. Meantime, China has inked bilateral currency swap agreements with over 30 countries and regions since late 2008.
To better understand where the yuan is, SWIFT data can be taken: 1.66 percent of global payments processed in January were denominated in yuan, a data too lower from the record of over 2 percent. But things are changing.
More and more countries take the yuan into consideration: Pakistan’s central bank adopted the yuan as a currency for trade with China and some central banks in European are including the yuan in their forex reserve mix.
Another strategy is the Belt and Road Initiative. It is expected that this initiative will be a powerful force pushing the yuan to global stage since it boosts cross-border use of yuan.
According to a SWIFT report, as Chinese mobile payment platforms like Alibaba’s Alipay and Tencent’s WeChat Pay keep promoting a cashless society, the use of yuan on digital platforms has been growing fast.
Including the yuan into investment portfolios will help optimize investment structure and return, while using the yuan in trade and investment will make it easier and cheaper for foreign firms to do business with China.