US interest rate concerns drive renminbi's ascendancy

Over recent months, a seemingly surprising trend has emerged on the global financial landscape — foreign investors are flocking to Chinese renminbi bonds, even as US bonds boast higher yields. These factors, they said, will continue to help the renminbi's ascent as an international currency, strengthening its reserve, payment, financing and pricing functions, and offering a win-win for the global economy. "The renminbi looks set to continue its steady rise in global foreign exchange reserves, in particular if it is supported by an improvement in the Chinese economy, the ongoing rise in the use of the renminbi in cross-border payments and the more widespread use of the digital yuan," said Castelli. The world's pursuit of alternative international currencies to the greenback, including the renminbi, has accelerated after the US froze the Russian central bank's foreign exchange reserves and removed several Russian financial institutions from the Swift messaging system in 2022, in the wake of the Russia-Ukraine conflict. Pan Gongsheng, governor of the PBOC, said in an interview with People's Daily in August that the central bank will promote renminbi internationalization by adhering to market-driven and voluntary principles, continue to improve cross-border renminbi policies, optimize the global layout of renminbi clearing banks, and promote the healthy development of the offshore renminbi markets.