Chinese President Xi Jinping’s pledge to curb financial risks and build a powerful currency with global reserve status, reiterated in a state publication, is boosting expectations of an accelerated push for yuan internationalization.
“What constitutes a strong financial nation?” according to Xi’s remarks published Saturday by the Qiushi magazine, based on his 2024 speech. “First, it should have a powerful currency, widely used in international trade, investment and foreign exchange markets, holding the status of a global reserve currency.”
The remarks in Qiushi, the Communist Party’s flagship journal and a window into high-level policy intent, likely signal China’s drive to internationalize the yuan and expand its financial clout. The timing is pivotal, as the dollar’s haven appeal fades amid Donald Trump’s sporadic tariff policies and global market swings on geopolitical risks.
“Based on various information, the top leadership is preparing to make more financial reforms,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group. “Policymakers could think that it’s a good timing right now because financial institutions have a strong consensus that the dollar is weakening.”
China’s financial system has grown far more complex than in the past, with risks now deeply interconnected, making risk prevention “an eternal theme,” he said.
Financial work, he added, should return to its core functions and improve competitiveness to better serve the real economy and diverse financial needs. “If finance becomes preoccupied with self-circulation and self-expansion, it will become water without a source or a tree without roots, inevitably leading to a crisis,” Xi said.
He also stressed the need for a strong central bank to prevent systemic risks, along with financial institutions that demonstrate “high operational efficiency and strong risk resistance.”
Dollar Downturn
China accelerated efforts to boost the yuan’s global profile as investors shift from the dollar amid US political uncertainty and concerns over Federal Reserve independence. Policymakers recently accepted international standards for foreign trading in onshore repurchase agreements.
Trader interest in the yuan surged in January when transaction volumes against foreign currencies hit their highest since August 2024, official data show. The onshore yuan edged up 0.1% against the dollar on Monday, lifting its year-to-date gain to 0.5%.
The yuan’s strength reflected dollar weakness and investor bets that the Chinese currency is deeply undervalued.
Dollar selling gained traction last month after US threats against Greenland and Trump’s apparent support of the currency’s slide fueled debate over its long-term decline. The greenback later rebounded on news of Kevin Warsh’s nomination as Federal Reserve chair and a pullback in precious metals.
In a report last week, the US Treasury characterized the yuan as “substantially undervalued” and called on China to allow its exchange rate to strengthen in a timely and orderly way.
China’s campaign to boost its financial influence has been years in the making. Xi first put forward the goal of building China into a financial powerhouse at a key policy meeting in 2023, signaling a desire to fortify the country’s financial system amid rising US tensions. Since then, the People’s Bank of China has overhauled its policy framework to position itself as a more modern central bank.
“We are in a very unique window, where the US is seemingly willingly stepping back from many of its roles in global leadership, including that of the dollar’s role as the center of global financial systems,” said Lynn Song, chief economist for Greater China at ING Bank NV. “The yuan’s usage has plenty of room to grow.”