Shanghai Futures Exchange (ShFE) announced on the 27th that it will open a draft proposal for domestic futures to overseas investors and brokers, claiming it as an effort to promote the internationalization of the Chinese yuan. On the same day, Bank of China supported the holding of the China-South Africa bond market interconnection and cooperation seminar in South Africa, with China also pledging to boost the internationalization of the yuan.
Economists analyze that the Chinese Communist Party (CCP) considers the internationalization of the yuan as self-indulgent and self-gratifying. It lacks many conditions for internationalization, especially considering its current situation of being trapped in a technology debt trap and experiencing rapid government debt expansion. Minor measures and small openings are not sufficient to change the yuan’s position in the international clearing mechanism, let alone replace the US dollar.
Shanghai Futures Exchange released a proposal for internationalization on Tuesday, seeking public opinions on the systematic internationalization transformation of existing business rules, fully involving overseas participants in the domestic futures market process. This initiative covers rule changes for 18 product futures, including aluminum oxide, nickel, and copper cathode, and the draft will be open for public feedback until June 4th.
The exchange stated that this long-planned initiative will achieve several goals, including meeting China’s desire to have a more direct impact on import commodity prices, thereby enhancing the attractiveness of the yuan in international financial markets and competing with the US dollar for international currency status.
On the same day, an event titled “China-South Africa Bond Market Interconnection and Cooperation Seminar,” organized by the People’s Bank of China with institutions including Bank of China, was successfully held in Johannesburg, South Africa. It played a significant role in solidly promoting the internationalization of the yuan and deepening economic and trade exchanges between China and South Africa.
Regarding Shanghai Futures Exchange expanding the trading of industrial metals futures and the CCP holding a bond market cooperation seminar in South Africa, can it truly promote the internationalization of the yuan? Taiwanese senior political and economic commentator Wu Jialong told the media that the CCP is self-indulgent and self-gratifying.
“The real challenge for the internationalization of the yuan is the liberalization of foreign exchange transactions, which the CCP cannot achieve. They control the currency and cannot trade freely like the US dollar, British pound, or Japanese yen in the foreign exchange market,” Wu said.
Wu further mentioned that if foreign investments in the yuan exit China, it can lead to capital outflow, which is why the CCP controls the yuan. He emphasized the need for a modernized bond market in China, similar to the US with credit rating agencies such as Moody’s and Standard & Poor’s.
Moody’s credit rating agency released a report on May 26, maintaining China’s sovereign rating at A1 with a negative outlook.
So, how can the yuan truly advance its internationalization? Wu believes that firstly, capital controls need to be lifted, as the stringent control of foreign exchange transactions hinders yuan internationalization. Secondly, a modern bond market must be established. These are vital elements that China currently lacks, despite its self-proclaimed internationalization efforts.
Researcher Wang Guochen from the Institute of China’s Economic Research at the Chinese Academy of Social Sciences told the media that based on his recent observations, the main reason the yuan cannot internationalize is due to the CCP being trapped in a technology debt trap.
During the heightened US-China trade tariff war, the CCP accelerated its technological development alongside countering US actions. However, as market value conversion from technology businesses is limited, they end up paying debts with government debt rapidly inflating.
Wang pointed out three resulting effects: first, with government debt expanding, the central bank is forced to issue more currency. Second, to alleviate debt repayment pressure, interest rates are kept low, leading to an expanding US-China trade imbalance and currency pressure. Third, excessive funds are skewed towards the technology industry while other sectors suffer, deteriorating the economy and the yuan’s exchange rate outlook.
In this background of depreciating yuan, Wang mentioned that the CCP is earning foreign exchange from Belt and Road Initiative countries to maintain exchange rate stability. Moreover, the CCP continuously withdraws investments from Belt and Road countries to support stock prices, funneling renminbi back to China to maintain stability.
According to official data from the Ministry of Commerce of the CCP, in March 2025, the yuan accounted for 4.13% of global payment currencies, ranking as the fourth-largest after the US dollar, euro, and British pound.
Wang noted that the yuan’s share in international payments has stagnated around 4%, making the opening of the yuan futures market not surprising at this time.
The General Administration of Customs of China announced in 2024 an annual export increase of 5.9% and import increase of 1.1%. The total annual import and export volume was $6.1 trillion, with exports at $3.5 trillion, imports at $2.5 trillion, and a trade surplus of $992.155 billion.
Regarding China’s record trade surplus, Professor Fan Jiazong from the Department of Political Science at National Taiwan University expressed that one reason the yuan cannot internationalize is because China does not run a trade deficit country. Only countries with trade deficits can export their local currency abroad.
Fan further criticized that China lacks many conditions necessary for internationalization. Despite the CCP’s continuous propaganda efforts, these minor initiatives and changes have had insignificant impact and are insufficient to alter the yuan’s position in the international clearing mechanism, let alone challenge the dollar’s supremacy.
In 2015, the Beijing government declared the “Made in China 2025” initiative. Bloomberg reported that CCP officials are drafting a future version of Xi Jinping’s flagship policy, indicating China’s intention to maintain control over the manufacturing industry while US President Trump demands more factories be relocated back to the US.
Fan mentioned that even after “Made in China 2025,” China still plans for further development beyond 2025 while remaining supply-oriented without structural changes towards a consumption-oriented economy. The reality is that China is unable to make this transition.
In conclusion, the internationalization of the yuan faces significant hurdles due to the CCP’s challenges such as technology debt traps, stringent capital controls, lack of a modernized bond market, and persisting trade imbalances. While China aims to boost the yuan’s presence in global markets, it must address these fundamental issues to truly advance its currency’s internationalization.