Background on the Relevant Person: The People’s Bank of China (PBOC)
The People’s Bank of China (PBOC), often referred to as the Chinese central bank, plays a crucial role in managing China’s monetary policy and financial stability. Established in 1948, the PBOC has been instrumental in shaping China’s economic growth and transition into a global financial powerhouse.
Current Global Trade Tensions and US-China Relations
In recent months, global trade tensions have escalated due to the ongoing disputes between the United States and China. Under President Donald Trump’s administration, the US has implemented tariffs on various goods from China, prompting retaliatory measures from Beijing. Although Trump announced a 90-day pause in the planned tariff increases for most countries, he raised tariffs on Chinese products to 145%, intensifying the trade friction.
PBOC’s Initiative to Promote Yuan Internationalization
In response to the rising global trade tensions, the PBOC has taken steps to accelerate the internationalization of the yuan. On April 21, the central bank stated that it is encouraging state-owned enterprises to prioritize yuan usage in cross-border payments and settlements as they expand overseas.
Key Measures by the PBOC
- Expanding Cross-Border Credit: The PBOC has urged commercial banks in Shanghai to broaden the expansion of cross-border credit, aiming to lower yuan financing costs for companies and promote yuan-denominated imports and exports.
- Strengthening CIPS: The central bank intends to reinforce the Cross-Border Interbank Payment System (CIPS) to enhance international yuan transactions.
- Blockchain Technology: The PBOC plans to study and promote blockchain technology applications for secure and efficient global trade, transportation, investment, and financing services denominated in yuan.
- Shanghai Gold Exchange Cooperation: The PBOC supports the Shanghai Gold Exchange’s collaboration with foreign exchanges to expand yuan-denominated price references in major global markets.
Collaborative Efforts and Supporting Agencies
The PBOC issued this notification in conjunction with the National Regulatory Administration, State Administration of Foreign Exchange, and the Shanghai municipal government to ensure a coordinated approach in promoting yuan internationalization.
Key Questions and Answers
- What is the People’s Bank of China (PBOC)? The PBOC is China’s central bank responsible for managing the country’s monetary policy and ensuring financial stability.
- Why is the PBOC encouraging state-owned enterprises to prioritize yuan usage? This initiative aims to accelerate the internationalization of the yuan amid rising global trade tensions between China and the United States.
- What measures is the PBOC taking to promote yuan internationalization? The PBOC plans to expand cross-border credit, strengthen the Cross-Border Interbank Payment System (CIPS), study blockchain technology applications, and support collaboration between the Shanghai Gold Exchange and foreign exchanges.
