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China's central bank officials see bigger global role for yuan as dollar wanes

Section: Daily Dispatches

By He Huifeng and Guo Rui
South China Morning Post, Hong Kong
Sunday, November 22, 2020

The Chinese currency is set to play a bigger role in global trade and investment in the wake of the pandemic, with the dominance of the U.S. dollar in the international monetary system expected to decline, two Chinese central bank officials said on the weekend.

Ding Zhijie, head of a research centre at the State Administration of Foreign Exchange, said the yuan had become a sought-after asset for global investors seeking stability and absolute returns as government bonds denominated in the U.S. dollar, yen, and euro offered little or even negative, yields.

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"Whether you look at interest rates or exchange rates, yuan assets have clear advantages now" against assets denominated in other currencies, Ding said Saturday at the Understanding China Conference in the southern city of Guangzhou, an event hosted by China to promote the country’s global influence.

China's five-year government bonds still offer an annual yield over 3 percent while U.S. government debt of the same maturity offers only 0.4 percent and the yield on German bonds is a negative rate of about 0.8 percent.

In addition, China's quick economic recovery from the coronavirus has helped the yuan to appreciate to a two-year high against the U.S. dollar, despite the central bank's efforts to slow the appreciation.

Ding's optimistic message reflected Beijing's fresh confidence that the yuan, despite its inconvertibility under the capital account, will play an increasingly important role on the international stage to indirectly undermine the anchor role of the U.S. dollar. ...

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