China Pushes Yuan Global Use, Vows Financial Vigilance

Key facts

• China announced measures to promote the yuan's global use and manage domestic liquidity.
• Six banks are authorized for offshore yuan transactions in Shanghai's free trade zone.
• A new tool will provide yuan liquidity to qualified overseas monetary authorities.
• Regulators aim to prevent systemic financial risk and support emerging industries.
• China's retail sales fell in May, while industrial output picked up.

At the Lujiazui Forum in Shanghai, China's central bank governor Pan Gongsheng announced new initiatives to boost the international use of the yuan, including authorizing six banks for offshore yuan transactions in the Shanghai free trade zone and developing a tool to provide yuan liquidity to overseas monetary authorities. These moves are part of China's effort to reduce reliance on the U.S. dollar-dominated global payment system. Pan also indicated that China's credit growth would not maintain its previous pace, acknowledging the difficulty and lack of necessity for such speed. Concurrently, Ding Xiangqun, head of the National Financial Regulatory Administration, pledged to prevent systemic financial risks, particularly from small institutions, real estate, and local government debt, while guiding financial resources towards emerging industries. China's economy shows a divergence, with weak consumption and a struggling property sector contrasted by growth in areas like robotics and AI.