China should position itself as an international lender of last resort to help out in global emergencies and expand use of the yuan around the world, according to a former senior Chinese central bank official.
Zhu Min, a former deputy managing director of the International Monetary Fund and former deputy governor of the People’s Bank of China, told the Tsinghua PBCSF Global Finance Forum in Chengdu last week that China had developed the foundations for a lender-of-last-resort role through currency swap agreements.
“The US dollar has long maintained its dominant position in part because the Federal Reserve has a large balance sheet, allowing it to provide liquidity support to the global financial system during crises,” National Business Daily quoted Zhu as saying.
“Can China be a ‘lender of last resort’? In recent years, several cases have shown that when countries with currency swap agreements with China face financial crises, the yuan can be quickly accessed and used, helping them to resolve international payment difficulties.”
According to the report on Tuesday, Zhu said that wider international use of the yuan would not only benefit China’s economy but also contribute to the stability of the global financial system and economy.
Beijing has been promoting wider international use of the yuan in efforts widely seen as key steps towards reducing reliance on US dollar-dominated financial channels.
“The weaponisation of the US dollar, trade wars, and high fiscal deficits are weakening the dollar’s credit foundation,” Zhu said. “Yet trust is the most fundamental basis of any currency.”
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