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Monday, September 15, 2025

15: Madhya York

मैले तत्काल अघि बढाउने ५ कुरा ‘तामझाम होइन, काम गरेर जेनजी पुस्ताले देखेको सपना साकार पार्ने हो’
रामेश्वर खनाल : जसले अर्थ मन्त्रालय त्यागे तर मन्त्रालयले उनलाई पछ्याइरह्यो
यस्तो छ अर्थमन्त्री खनालको पहिलो निर्णय
महामन्त्री पद छाेड्न तयार छु : गगन थापा

China is ditching the dollar, fast Officials believe that the yuan has finally come of age ......... CHINA’S LEADERS sense an epic opportunity. President Donald Trump’s erratic trade policy, gaping fiscal deficits and threats to the independence of America’s Federal Reserve risk badly hurting the dollar. It has slumped 7% on a trade-weighted basis since January, and had its worst start to a year since 1973. ............ By contrast, China’s tightly controlled currency, the yuan, has reached its highest level since Mr Trump was re-elected in November. Foreign investors are piling in. So are many governments looking for dollar alternatives. ............... China’s leaders think a globally accepted yuan can insulate their exporters from movements in the dollar’s value and blunt the threat of America’s financial sanctions. Some officials hope that foreign firms and investors will overlook the state’s rigid control and, perhaps, even come to see it as an asset. In recent years they have made surprising gains. The yuan’s share of invoices and overseas lending has grown and there has been an impressive buildout of non-dollar financial infrastructure to match. But officials seem to recognise that foreigners now need greater incentives to use the yuan and to invest in yuan assets. ............. By any measure, the yuan lacks cachet. Though China is responsible for nearly a fifth of global economic activity, its tender is used in only 4% of international payments by value (compared with 50% for the dollar). Yuan assets make up just 2% of global central-bank currency reserves (compared with 58% for dollar assets). A lot of this mismatch can be blamed on China’s controls on money flowing in and out of the country. Many economists think that internationalising the yuan is impossible while they remain in place. ........... But even after America became the world’s largest economy, it still took decades for the dollar to achieve dominance. By that timescale, China is making surprisingly rapid progress. ........... Over 30% of China’s trade in goods and services is now done in its own currency (compared with 14% in 2019). It settles more than 50% of its total cross-border receipts (including financial flows) in yuan, up from less than 1% in 2010 (see chart 1). ................... To increase circulation, officials want to encourage trade partners to accept China’s currency as payment. A major lure is offering them yuan liabilities. .......... after sanctions were imposed on Russia in 2022, Chinese banks switched nearly all of their new overseas lending out of dollars and into yuan (previously only 15% of loans were made in yuan), thereby tripling the stock of outstanding yuan debt ............ In the time since it began its internationalisation push, China has extended 4.5trn yuan ($630bn) in swap lines to 32 central banks, creating a global financial safety net that rivals the scale of the IMF’s. Only a fraction of such lines has actually been drawn on. The idea is to guarantee countries’ access to yuan in a crisis, giving them the confidence to borrow and buy in the currency. ............. While all this has been going on, China has also sorted its own financial plumbing. Now it can transact with others without touching the dollar system through a variety of means. These include the digital yuan and non-bank digital payments (such as through QR codes on apps popular in Asia). Most important is the invention of CIPS, which bears similarities to SWIFT, the West’s bank-messaging system. Since Chinese banks can and do transact outside SWIFT, the yuan’s role in international payments is probably being undercounted ..............

More than 1,700 banks have signed up to CIPS across the globe, up by a third since before the war in Ukraine. Transaction volumes rose faster than ever in 2024, up by 43% to 175trn yuan ($24trn). Clearing banks to settle yuan payments (almost all of which are operated by Chinese institutions) have been set up in 33 markets. Some joined this year, including banks in Turkey and Mauritius. China began working with the United Arab Emirates in June in order to expand the CIPS network into north Africa and the Middle East.

.............. Last year several billion dollars were said to have been transacted over a digital-currency network called mBridge, built by China with other central banks. .......... China’s next safe move is opening up its onshore capital markets to its pals. In July Hungary issued about 5bn yuan in so-called “panda bonds”, the largest single sovereign issuance to date. On September 8th the Financial Times reported that Russian energy firms had been given the go-ahead to issue yuan-denominated paper. Kenya may soon swap the dollar debts it owes to China into yuan. Meanwhile, Brazil is mulling a new issuance and Pakistani officials have been in Beijing to pitch potential creditors. ........... In a big speech in June China’s central-bank governor, Pan Gongsheng, declared that the global financial system was becoming “multipolar” and that in future the dollar would be forced to compete with other currencies, such as the yuan. Such competition, China hopes, means the country will have to do less to reduce its dollar dependence, and can resist liberalising capital flows and the exchange rate.

The yuan may yet be a global currency with Chinese characteristics.

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