Key Takeaways:
Zhongtai Financial International Chief Economist Li Xunlei argues China should pursue a yuan-pegged stablecoin strategy to counter U.S. dollar dominance. Li recommends pilot programs in free trade zones and Belt and Road countries, with legal and regulatory frameworks in place. He urges the People’s Bank of China to apply unified regulatory principles and consider broader capital market reforms.A stablecoin strategy is necessary for the Chinese yuan to increase its international influence and counter the dollar’s overrepresentation in global finance, according to an article published by Zhongtai Financial International Chief Economist Li Xunlei on July 1.
Li writes that the dollar’s dominance is partly sustained by its extensive role in stablecoin issuance. Over 80% of the world’s stablecoins are pegged to the U.S. dollar, which he says contributes to excessive dollar liquidity. By contrast, the yuan remains underrepresented in cross-border payments, trade finance, and reserves.
Li Calls for CNY Stablecoin Strategy
The Chinese yuan’s market exchange rate is undervalued compared to the country’s purchasing power parity (PPP), Li states in the piece. “This undervaluation is mainly due to the renminbi’s insufficient global liquidity, which results in an elevated liquidity premium,” said Li.
He notes that while other jurisdictions are advancing regulatory frameworks for stablecoins, citing recent developments in the U.S. and Hong Kong, China has yet to introduce formal legislation.
He recommends pilot programs in free trade zones and Belt and Road markets, backed by clear rules on reserve management and legal definitions.
According to Li, the People’s Bank of China (PBOC) should explore issuing yuan-pegged stablecoins under a regulatory framework aligned with the principle of “same activity, same risk, same regulation.”
He says such a move would expand the yuan’s cross-border use in settlements, financing, and digital payments without undermining monetary control.
“The core function of stablecoins is not to replace fiat, but to provide a digital, efficient cross-border form of fiat circulation, enhancing the liquidity of the pegged currency and its global status,” he writes.
Yuan’s Path to Internationalization
Li also recommends broader steps to support the yuan’s internationalization, including increasing capital account openness and adjusting China’s foreign reserve structure.
He concludes that without such measures, the gap between the yuan’s economic weight and its international usage will persist, leaving China at a disadvantage in shaping the future of global currency systems.
The yuan’s absence in stablecoin markets limits its role in digital finance. Without a compliant, widely used digital form, the currency cannot easily scale in cross-border payments or compete with dollar-backed tokens.
Regulation will determine how stablecoins evolve. If China delays action, others will set the standards. A clear framework for yuan-denominated stablecoins would let China shape digital payment flows and reduce reliance on dollar-based systems.
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