MNI BRIEF: E-CNY To Promote Yuan Cross-Border Use In GBA -CF40

China will expand the inner-regional and cross-border use of the e-CNY and facilitate capital movements in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) to promote the yuan in financial transactions, as well as the internationalisation of the currency, according to a report unveiled at the 2023 Greater Bay Area Fintech Summit held by China Financial 40 Forum on Saturday.

The GBA will build more financial infrastructure for e-CNY’s cross-boundary use, which will assist the yuan to become the dominant currency in financial transactions in the region and reduce the risk of currency mismatch, the report said. It called for more financial facilities to aid the circulation of funds and resources in the GBA.

Huang Yiping, deputy dean of National School of Development at Peking University, said yuan internationalisation was more focused on market demand and investment after prioritising trade settlement at the beginning. However, the lack of capital account convertibility in the mainland was the biggest long-term challenge, though several Connect schemes provided “channel-style opening up”. He said policymakers should be more flexible in approving financial institutions in the region to carry out cross-border securities and investment services, and the e-CNY should play a positive role as it facilities capital movement.

The report said a supervision system, similar to the current macro-prudential system, should be set up to prevent risks as financial sectors in the region become more connected. Last Thursday, the People's Bank of China, along with four other authorities, unveiled 30 new measures to aid financial market interconnection, promotion of cross-boundary trade, and strengthening of financial supervision in Hengqin and Qianhai, two key cities in the GBA.