China’s Central Bank to Support Offshore CNY Market and Cross-Border Transactions
The People’s Bank of China, also known as China’s central bank, has expressed its commitment to promoting the development of the offshore Chinese yuan market and cross-border payment system. In an interview with the bank’s deputy governor, Tao Ling, the future steps for expanding the country’s legal tender in the global market and further internationalizing it were discussed.
Tao emphasized that the central bank has been responsive to both domestic and international economic conditions and the demands of the market. It aims to provide businesses, both domestic and international, with a more diverse and convenient choice of currency. Currently, the yuan ranks as the fourth most utilized currency for global payments, the third most used currency in trade financing, and the fifth most traded currency in foreign exchange markets.
To support the growth of the offshore CNY market, the central bank plans to enhance the liquidity supply mechanism and improve the issuance of sovereign bonds overseas. It also aims to strengthen financial market connectivity between mainland China and Hong Kong. Additionally, the bank will focus on establishing and enhancing financial infrastructure, including the Cross-border Interbank Payment System (CIPS) for yuan, by expanding its service capabilities and range.
In terms of cross-border transactions, the bank aims to increase the security and efficiency of yuan clearing and settlement. It will optimize the layout of CNY clearing banks and effectively utilize currency swap mechanisms to promote the development of the overseas market.
Tao Ling, who became the first female deputy chief of the People’s Bank of China in nine years in March 2024, brings a wealth of experience as a central banker and financial regulator to her role.
SWIFT China President, Wen Yang, has also highlighted the challenges and solutions for cross-border central bank digital currency (CBDC). Yang pointed out the significant technological differences among economies, including protocols and standards, which result in fragmentation and data silos. SWIFT plans to expand its CBDC solutions to simplify digital transactions and enhance support for on-chain forex settlements and cross-border payments.