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China’s central bank governor has said he expects a new global currency order to emerge after decades of dominance by the US dollar, with the renminbi competing in a “multi-polar international monetary system”.
Speaking at China’s flagship financial forum in Shanghai, Pan Gongsheng said the US dollar had “established its dominance” after the second world war and “retained its status up till now”. He warned of “excessive reliance” on a single currency.
“In the future, the global monetary system may continue to evolve towards a pattern in which a few sovereign currencies coexist, compete with each other, and check and balance each other,” he said, pointing to a growing role for the renminbi.
Pan said the key developments in the international monetary system during the past two decades had been the introduction of the euro and the rise of the renminbi since the global financial crisis in 2008.
The renminbi, he noted, was the world’s second-largest trade finance currency and third-largest payment currency.
His comments came a day after Christine Lagarde, president of the European Central Bank, said the “dominant role of the dollar” was “no longer certain”, creating an opening for the euro to take “global prominence”.
Pan’s comments also indicate a renewed urgency in China’s long-standing push for a “multi-polar” currency system, as China clashes with the US over trade and Donald Trump’s imposition of higher tariffs.
Beijing and Washington have entered a fragile truce that reduced tariff levels from an April escalation, but tensions remain elevated under a new US administration that has shaken up international trade.
“When geopolitical conflicts, national security interests or even wars occur, the international dominant currency is easily instrumentalised and weaponised,” Pan said.
Pan and Lagarde met in Beijing last week to sign a memorandum of understanding on co-operation in central banking, which includes a framework for regular dialogue.
Pan also noted discussions around greater use of SDRs — a basket of currencies defined and maintained by the IMF — as a potential alternative that could help “overcome the inherent problems of a single sovereign currency as the dominant international currency”.
His comments coincided with multiple announcements on Wednesday related to China’s push for a more renminbi-centred currency system, including an international operation centre for the digital renminbi in Shanghai.
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Six foreign institutions, including Singaporean bank OCBC and Kyrgyzstan’s third-largest lender Eldik Bank, also said they would join China’s Cross-Border Interbank Payment System (Cips), an alternative to the Swift global payment system.
Hong Kong and Shanghai authorities also on Wednesday signed an “action plan” to strengthen financial ties, including the management and allocation of renminbi-denominated assets.
Zhu Hexin, deputy governor of the PBoC and head of the State Administration of Foreign Exchange, said Beijing would expand a scheme allowing domestic investors to buy assets outside China. Zhu said the expansion of the Qualified Domestic Institutional Investor scheme would “fulfil the growing onshore needs for offshore investment”.
