China Accelerates Yuan Global Push Amid US Retreat

China Accelerates Yuan Global Push Amid US Retreat

Why in the News ?

Amid rising U.S. tariffs and global uncertainty, China is intensifying efforts to internationalise the yuan, expanding QR code networks, enhancing currency swap lines, and promoting cross-border payments, leveraging growing distrust in the dollar and Western financial systems.

China’s Yuan Push and Strategic Moves:

• President Xi Jinping’s visits to Southeast Asia coincided with renewed yuan outreach amid S.-China trade tensions.
• PBOC promoted cross-border yuan settlements and strengthened QR code payments in countries like Vietnam and Cambodia.
• UnionPay’s network now spans over 30 countries, supporting small businesses and tourism transactions in yuan.
• China’s currency swap agreements surged to a record 3 trillion yuan ($591.2 billion) in February.
• Digital yuan was used in commodity trades, with efforts to price oil and gold in yuan.

Global Shifts and Motivations Behind Yuan Expansion

• S. tariff weaponisation is eroding global trust in the dollar, prompting demand for alternatives.
• China seeks financial independence by reducing reliance on Western banks and systems.
• Countries like Argentina and Pakistan are expanding yuan swap deals to secure trade resilience.
• PBOC is enhancing CIPS, China’s own cross-border payment system, and applying blockchain for secure digital yuan use.

Limitations, Opportunities, and Global Implications

• China’s closed capital account limits yuan convertibility, hindering full global acceptance.
• Yuan ranks 4th in global payments (only 4% share, per SWIFT).
• Experts argue euro might gain faster than the yuan, but China’s Global South engagement could drive future use.
• This shift signals a possible restructuring of the global monetary order amid growing S. fragility.