The yuan has the potential to become a safe-haven currency, a former central bank official said while calling for capital-control flexibility and greater efforts to boost foreign participation.
The argument – presented before the US Treasury chief rejected the possibility last week of the yuan gaining reserve-currency status – has underscored the ongoing debate over Beijing’s push to internationalise the yuan. And it comes at a time when confidence in the US dollar is being tested by mounting debt risks and an amplified protectionist push by US President Donald Trump.
“In terms of institutional credibility – the government and central bank’s commitment to stability – as well as macro fundamentals such as low inflation, current account surplus and large foreign reserves, the yuan already enjoys considerable advantages,” Sheng Songcheng, former head of the central bank’s statistics department, and Sun Dan, an economist and researcher with the CEIBS Lujiazui International Institute of Finance, wrote in a recent article.
In the latest issue of Hong Kong International Finance Review, the two authors contended that the yuan had shown reduced sensitivity to risk indicators during recent periods of global stress, including from the ongoing Russia-Ukraine war and amid shocks from US tariffs.
The yuan has already displayed a more “stable and neutral” performance and partial safe-haven traits, they said in the June 30 edition.
Traditionally, the US dollar, Japanese yen and Swiss franc are regarded as safe-haven currencies.
Since Trump’s announcement of sweeping “reciprocal” tariffs on April 2, the Chinese currency has shown resilience, with the offshore yuan briefly weakening to around 7.4 per US dollar before rebounding to about the 7.2 level.
