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China explores bond market to internationalize yuan
The article discusses China's plan to issue sovereign bonds worth up to 10 trillion yuan (approximately $1.5 trillion) in foreign markets with the aim of internationalizing the yuan. Through this move, China seeks to turn the yuan into a reserve asset used in investments and financial holdings, rather than relying solely on its use in trade. Although China is not currently facing a currency crisis, issuing these bonds will help increase the yuan's share of global foreign exchange reserves, which currently stands at less than 2%. The article highlights that this contributes to expanding the use of the yuan as a means of payment and settlement, but for the currency to become a store of value, a strong and flexible bond market is necessary—something China faces barriers to, due to capital movement restrictions compared to the US dollar. Experts indicate that issuing foreign debt may increase the sensitivity of bond and currency prices to global market shifts, and balancing financial liberalization with capital controls presents a challenge to efforts to internationalize the yuan.
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