Herbert Poenisch is Senior Research Fellow at Zhejiang University.

The article  was first published on OMFIF on  Nov20th, 2025.

The language from Chinese authorities is becoming more assertive

Markets have noticed the more assertive language regarding the internationalisation of renminbi. Speaking at the fourth plenum of the Communist Party of China, Pan Gongsheng, governor of the People’s Bank of China, expressed this through three themes: promoting the use of the renminbi for trade, a gradual and orderly opening of financial markets and support of the offshore renminbi market.

While the second and third areas offer prospects for enhanced renminbi market functioning, the first one has major implications for cross-border payments, boosting the use of renminbi and reducing the use of the dollar for trade payments.

China as a major trading partner

China is leveraging its role as the major trading partner of some 150 countries round the globe. This is happening already among Brics countries where national currencies are being used to pay cross-border trade. China is the major trading partner of countries in the Brics bloc, spearheaded by Brazil, Russia, India, China and South Africa, and countries involved with China’s Belt and Road Initiative are next in line to use the renminbi in trade.

China has recorded trade surpluses for many years with the rest of the world. In 2024, it had a surplus of $768bn for trade in goods. In the extreme this means that the rest of the world would have to find the equivalent of $3.4tn in renminbi to pay for imports from China. Part of this would be payments in renminbi for China’s imports of goods such as energy, worth $2.6tn. However, this is highly hypothetical as many of China’s trading partners are unlikely to accept renminbi.

This leaves an enormous amount of renminbi to be made available to China’s main trading partners through capital exports while keeping financial account restrictions in place. Compared with the dollar, which flowed out into the world as a result of US current account deficits, running surpluses requires mechanisms for renminbi to flow out of China.

Increasing the use of renminbi

For Brics and Belt and Road countries one way is to provide them with outward direct investment, portfolio investment and other investment with loans in renminbi. Another way is to ease non-Chinese issuances in the onshore panda bond market or offshore dimsum bond market.

Other countries that do not need to borrow in renminbi will have to purchase the currency in the market. This will lead to greater demand for renminbi and thus pressure to appreciate. China can also activate the swap agreements it has concluded with 32 central banks as of 25 May 2025. These include Brics countries such as Brazil, Russia, South Africa, Indonesia, Egypt and the United Arab Emirates.

Payments for Chinese exporters can be settled through the Cross-Border Interbank Payment System – China’s wholesale real-time gross settlement system. As of end October 2025, it has 184 direct participants and 1553 indirect participants from 167 countries. Of these, 1138 are from Asia – with 568 coming from China, 64 from Europe, 64 from Africa, 34 from North America, 33 from South America and 24 from Oceania. Annual transactions through CIPS in 2024 amounted to Rmb175tn ($24tn).

This is still small compared with Swift-intermediated transactions of $150tn between 11,500 institutions from 220 countries. However, the Chinese system has improved markedly and is able to absorb increased demand for renminbi clearing.

China will also need to ease access to hedging activities for traders in renminbi, such as access to renminbi forwards, swaps and options as well as bond futures. As the 2025 Bank for International Settlements’ triennial survey has shown, these already make up the bulk of transactions, compared with simple spot transactions. Most of these are available on the offshore renminbi market.

However, the offshore renminbi market needs to be invigorated. At the moment it is highly engineered to minimise the differential between onshore and offshore renminbi, and thus the impact of hedging operations on monetary policy. Allowing third parties access to renminbi, such as issuing securities and bond futures, will be a major step towards a global renminbi market comparable to the Eurodollar market.