China’s yuan strategy is not paying off with trade partners, survey finds, as ‘policy and market risks are uncontrollable’
- Latest Cross-Border Yuan Insight report suggests that Beijing’s efforts to challenge US dollar hegemony still face considerable hurdles
- From fluctuations in the yuan exchange rate to impediments in cross-border capital flows, it is not easy to convince trade partners to settle in the yuan
Despite Beijing’s determination to boost overseas use of China’s currency, fresh survey findings indicate that an “unwillingness among trading partners to use the yuan” remains the biggest obstacle to cross-border trade settlements.
About 47.7 per cent of surveyed enterprises said the lack of interest among trading partners to use yuan was the main hindrance to its proliferation, according to the first-quarter Cross-Border Yuan Insight report – the results of which were jointly released on Monday by the Bank of Communications, China’s fifth largest bank by size, and Renmin University’s International Monetary Institute think tank.
Among respondents, around one-third of them said the difficulty level remained unchanged from a year prior, while about 11 per cent believed it had worsened.
A total of 1,657 companies were surveyed in March. Approximately 71 per cent are private businesses, 13 per cent are state-owned enterprises, and 15 per cent are foreign-funded enterprises.
The findings reflect the challenge Beijing is facing is trying to turn the yuan in a global currency capable of challenging the US dollar’s global hegemony that affords Washington considerable power in imposing crippling sanctions and waging other forms of financial warfare.
The yuan’s internationalisation index, as measured by China’s central bank, has considerably improved since 2009, but it still lags far behind the dollar and the euro in terms of trade settlement, international payments, forex trading and central bank forex reserves.
