Summary: China is utilizing the Belt and Road Initiative (BRI) to promote the international use of the yuan, as the currency’s share of global payments reaches a record high. During the recent Belt and Road Forum in Beijing, China’s policy banks signed yuan-denominated loan contracts with foreign lenders. The increased use of the yuan is driven by geostrategic tensions and high US interest rates, with China leveraging BRI projects to boost the currency’s international clout. While the yuan still has a long way to go to challenge the dominance of the US dollar, this expansion is a step towards broader international acceptance.
China is using its Belt and Road Initiative (BRI) to promote the international use of its currency, the yuan. At the Belt and Road Forum in Beijing, China’s policy banks signed a series of loan contracts denominated in yuan with foreign lenders. This move comes as the yuan’s share of global payments reaches record levels. The increased use of the yuan is due to geostrategic tensions and high interest rates in the US, which has made the currency more attractive to some countries. Furthermore, funding BRI projects has helped China boost the internationalization of the yuan, which has been a goal for the past 10 years.
While the yuan’s share of global payments has risen to a record high, it still pales in comparison to the dominance of the US dollar. However, the expansion of the yuan’s international use through BRI projects is seen as an opportunity for China to increase its influence in the global financial system. Notably, countries that have strategic agreements with China, such as Russia, are more inclined to use the yuan for trade settlements. Despite these developments, experts caution that the yuan still faces challenges in becoming a reserve currency, such as its small share in the oil trade and concerns over holding Chinese assets. Nevertheless, the increased internationalization of the yuan is a significant step towards broader acceptance of the currency on the global stage.
Tags: China, Belt and Road Initiative, yuan, currency internationalization, global payments