MNI POLICY: Ex-PBOC Official Urges China Yuan Globalization

China should push forward the international use of the yuan amid the growing politicization of trade and economics and reduce its dependence on the dollar-dominated global payment infrastructure, said Zhang Xiaohui, a senior fellow at the China Finance 40 Forum, a prominent think tank in China.

The yuan could gain more prominence if China conducts in yuan more currency swaps, foreign aids and foreign preferential loans, said Zhang, a former assistant governor of the People's Bank of China, during China Finance 40 Qujiang Forum on Saturday.

China can improve the efficiency of cross-border currency clearance through promoting its system CIPS (Cross-Border Interbank Payment System), and shifting current gross settlements to net settlements in dollar transactions, so also to reduce its reliance on SWIFT and strengthen Chinese companies' global participation, said Zhang.

While the yuan is attractive to overseas investors given its higher rates of returns, it is less advantaged in trade relative to the dollar, euro and yen, said Zhang.

Zhang, who was head of monetary policy department at the PBOC, said China has plenty of tools including cutting rates and reserve requirement ratios to keep growth stable and better serve the domestic stream of Chairman Xi Jinping's Dual Circulation strategy.

--STRUCTURAL FACILITIES

PBOC can use structural facilities to help manufacturers and private companies, boost private investment and domestic consumption, said Zhang. China has undertaken comparatively modest monetary and fiscal stimulus while bailing out the economy from the coronavirus, leaving more ammunition and controllable leverage ratios, she said.

China should encourage commercial banks to take stakes in small businesses in need of long-tern capital, Zhang said. China should also reform its pension system and encourage the growth of the individual commercial insurance via providing preferential tax in a bid to provide the long-term steady capital to the financial market,