The yuan's internationalization continues on an upward, though inconsistent, path and is slowly transforming the global financial system, according to a new report presented at a prominent economic conference in Beijing - although some attendees cautioned about U.S. initiatives todominate digital finance pose risks.
The global usage of the yuan, measured by the yuan internationalisation index, increased by approximately 11 percent in 2024 to reach 6.06, as stated in a report from Renmin University presented at this year's International Monetary Forum, which was co-organized with Nankai University on Sunday.
In comparison, the US dollar achieved a score of 51.13 in 2024, a decrease from 51.52 in the prior year, whereas the euro dropped by 3.8 percent to 24.07 on the index.
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In the meantime, the yuan was positioned above the British pound and Japanese yen, which had scores of 4.47 and 3.69 respectively. The report forecasted that the Chinese currency would grow stronger and increase the difference compared to both.
Beijing has worked to steadily increasethe yuan's international usage - particularly as it intensifies initiatives to address risks associated with cross-border capital movements.
The report's authors stated that the spillover impacts of geoeconomic shocks have not only affected China's real economy and financial markets, but also caused disruptions in global trade and investment systems, supply chains, and international financial markets.
Encouraging the global use of the yuan and utilizing it to drive changes in the international financial system is a crucial approach to reduce geopolitical economic risks.
The report noted that the upward trend continues unchanged and is "prompting a slow shift in the global financial system."
But forum members expressed worries that the increasing power of US-backed stablecoins mightconsolidate the dollar's dominanceand bring in novel systemic risks.
"Over the past two years, some countries have attempted to advance early regulatory structures for stablecoins via laws and extended legal authority, while simultaneously hindering and excluding the growth of digital currencies from other nations," stated Chen Yulu, former vice-governor of the People's Bank of China, at the conference.
If this pattern is permitted to expand without control, it may present substantial systemic dangers to the worldwide economic and financial framework.
Chen, currently the president of Nankai University, cautioned that this trend could "put the global financial system at significant risk due to the volatility of individual assets" – with disturbances affecting the US dollar and Treasury bonds possibly propagating from stablecoins to the wider cryptocurrency ecosystem and even global financial markets.
Although stablecoins can be linked to any fiat currency, over 99 percent are currently supported by the US dollar or assets denominated in dollars—significantly exceeding the dollar's approximately 50 percent share in global payments and 58 percent share in global foreign exchange reserves.
Earlier this month, the United States House of Representatives approvedlandmark stablecoin legislationIt was enacted by President Donald Trump. For the first time, it introduced federal regulation for dollar-pegged stablecoins.
At the conference, Li Lihui, former head of the Bank of China, stated that Washington's actions seek to tie stablecoins to the dollar in order to "maintain global monetary and financial dominance in the digital age" and increase the demand for U.S. Treasury bonds.
This would effectively link the risks associated with the cryptocurrency market to those of the conventional financial system, he further noted.
If the United States does not tackle its dual deficits, it might lead to a financial crisis. A volatile US economy and currency would inevitably harm the stability of stablecoins pegged to the dollar.
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This piece was first published in the South China Morning Post (www.scmp.com), a top news outlet covering China and Asia.
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