China steps up push to internationalise the yuan as global dollar dominance wavers

China is ramping up efforts to internationalise the yuan, taking advantage of declining global confidence in the U.S. dollar and expanding access for foreign investors to domestic financial markets.

Three major Chinese exchanges recently opened 16 additional futures and options contracts — covering commodities like rubber, lead, and tin — to qualified foreign institutional investors. The move is part of a broader push to embed the yuan more deeply into global commodity pricing and financial transactions.

Peoples Bank of China Governor Pan Gongsheng signalled growing policy intent, proposing steps to reduce reliance on the dollar, including plans for a digital yuan internationalisation centre in Shanghai and expanded trading in yuan FX futures.

Beijing has also taken steps to attract international investors:

• Foreign currencies may soon be accepted as collateral in yuan-settled trades.
• ETF options trading will be opened to foreign investors.
• Fee waivers have been introduced for overseas institutions accessing the bond market.
• Morgan Stanleys China unit has gained approval to expand brokerage services.

The U.S. dollar remains dominant — still accounting for nearly 50% of global payments — but China is making steady gains. Yuan use in cross-border trade is rising, particularly in energy and commodities, and more Chinese banks are issuing loans in yuan to emerging markets.

Despite increased momentum, challenges remain. Capital controls, limited asset liquidity, and legal opacity continue to deter many investors. Analysts also caution that China must do more to address geopolitical risks tied to its markets.

Still, the yuans role is growing, aided by regional de-dollarisation trends and investor moves to hedge against U.S. assets. According to State Street Global, institutional flows into yuan assets have strengthened this year — though positioning remains light, leaving scope for further inflows.