Key Figures and Context
Pan Gongsheng, the head of China’s central bank, has pledged to broaden the international use of the digital yuan and advocated for a multipolar global monetary system where multiple currencies dominate the global economy.
Pan Gongsheng, the governor of the People’s Bank of China (PBOC), made these statements during the Lujiazui Forum, a high-level gathering of local and foreign financial executives and regulators. He announced that China will establish an international operations center for the “e-CNY” in Shanghai.
Reasons for the Push
This push comes amid renewed global interest in the yuan, as international trade tensions sparked by U.S. tariff policies have prompted investors to seek alternatives to dollar-based investments.
Simultaneously, China is accelerating its efforts to develop independent financial systems, moving away from Western institutions. These measures have gained momentum as shifting trade patterns and geopolitical realignments reshape the global economic landscape.
Benefits of a Multipolar Monetary System
Pan stated that a multipolar international monetary system would strengthen political constraints on countries with sovereign currencies, increase the resilience of the system, and better safeguard global financial stability.
Such a system would pave the way for certain currencies to dominate their respective regions, thereby reducing dependence on the dollar.
Impact of U.S. Trade Policies
The aggressive and erratic imposition of tariffs by Washington has shaken confidence in the U.S. dollar and other U.S. assets, prompting a broader shift among investors away from the dollar and towards Asian currencies and the euro.
Moreover, the growing global interest in cryptocurrencies, including “stablecoins” — a type of digital currency backed by an asset and maintaining a stable price — further erodes the dollar’s appeal.
China’s Global Ambitions for the Yuan
China has long aimed for the yuan to become a global currency, similar to the euro or the dollar, reflecting its status as the world’s second-largest economy.
However, this goal has been hindered by the reluctance to open its capital account. Despite this, progress in other areas, such as in Russia and other trade partners, is accelerating.
Recent Developments
On Wednesday, six foreign banks, including Standard Bank and First Abu Dhabi Bank, agreed to use China’s cross-border interbank payment system (CIPS) in the future, further expanding the yuan’s use in global trade.
Pan emphasized that traditional cross-border payment systems are inefficient and vulnerable to geopolitical risks due to digital technology advancements.
Addressing Geopolitical Risks
Pan warned that traditional cross-border payment infrastructures can easily be politicized, turned into weapons, and used to impose unilateral sanctions, harming the global economic and financial order.
