MNI POLICY: Ex-PBOC Official Urges China Global Push of Yuan

China should urgently push forward the international use of the yuan to counter the growing politicization of trade and economics and reduce dependence on the dollar-dominated global payment infrastructure, said Zhang Xiaohui, a former assistant governor of the People's Bank of China.

The yuan could gain more prominence if China conducts more bilateral currency swaps, foreign aids and foreign preferential loans in yuan, Zhang said in a forum on Saturday. China can improve the efficiency of cross-border currency clearance through promoting its systems such as CIPS (Cross-Border Interbank Payment System) and reduce reliance on SWIFT and strengthen Chinese companies' global participation, said Zhang, now a senior fellow at China Finance 40 Forum

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, also 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 to bail out the economy from the coronavirus, leaving more ammunition and controllable leverage ratios, she said.

China should encourage commercial banks to take equities in small businesses in need of long-tern capital, Zhang said. China should also reform its pension systems and encourage the growth of private commercial insurance via preferential taxes to channel long-term capital to the financial market, said Zhang.