China has a unique window to internationalise its currency by deepening domestic financial markets, according to a former senior US central bank official who pointed to the evolution of the US dollar and the euro for lessons to be gleaned.
The comments from Charles Evans, former president of the Federal Reserve Bank of Chicago, provide a fresh perspective in the growing discussion over whether and how the world’s second-largest economy can transform the yuan into a global currency.
Speaking on the sidelines of the UBS Asian Investment Conference in Hong Kong, Evans highlighted the enduring advantages of the US dollar. His comments came amid growing criticism over the currency’s weaponisation, US debt sustainability, and policies from the administration of US President Donald Trump.
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“One reason why the US dollar plays such a strong role in financial market transactions, and also trade transactions, is the vibrancy of financial markets, the depth of capital markets, Treasury debt, and the fact that it’s traded and it’s useful for financial activities,” he said on Wednesday. He also noted how internationalisation typically requires a currency to be fully convertible.
“Those are big issues for a country like China,” he said.
Beijing has been steadily promoting the yuan’s use overseas since introducing cross-border trade transactions in 2009.