China Tightens Grip on Cross-Border Yuan Deals to Advance Dollar Challenge Campaign

Beijing doubles down on yuan internationalization—dollar dominance gets a direct challenge.

Regulatory Shift

New controls streamline cross-border transactions, cutting dollar dependency. No more loopholes, no more exceptions. The playbook? Force global acceptance through trade channels.

Strategic Push

Exporters now face stricter settlement rules—yuan or nothing. Importers get incentives to ditch greenback invoices. Central bank digital currency integration accelerates behind the scenes.

Market Impact

Currency swaps expand with BRICS partners. Treasury portfolios rebalance—slowly. Western banks groan over compliance costs (again).

Because nothing says 'global reserve currency' like government mandates—ask the dollar how that worked out last century.

Investor sentiment turns bullish on yuan prospects

In markets, some investors see room for a much stronger Chinese currency.

Stephen Jen, chief executive of Eurizon SLJ Capital, said the yuan could stage a large rally as authorities face pressure to allow appreciation. The currency is up about 2.4% against the dollar this year, but it has fallen versus several other major peers because the dollar’s drop elsewhere has been even steeper.

That has created the impression of an “opportunistic devaluation,” he said, warning of possible pushback from key trading partners. The yuan traded NEAR 7.13 per dollar on Monday.

“The low 6s WOULD make more sense than where we are now,” Jen said, noting his “dollar smile” framework. “A more reasonably priced renminbi and a less predatory exchange rate policy would earn China some good will from the rest of the world.”

Positioning has turned more optimistic. Hedge funds have bought bullish options after recent weak U.S. jobs figures, and a sharp equity rally has raised doubts about how much more monetary easing is likely, both factors seen as supportive for the yuan.

Trade weighted yuan still down despite dollar weakness

Bank of America and Deutsche Bank also look for gains, though they target a milder 6.7 per dollar over the next year or so.

In March, Jen argued the dollar was about 20% too high and set for a multi-year adjustment. The U.S. dollar has also logged its longest losing streak since April 2023, providing a supportive backdrop for the yuan, as reported by Cryptopolitan.

Against Europe’s common currency, the yuan has slipped about 9.6% this year and more than 5% versus the British pound. On a trade-weighted basis, it is down around 4.6%.

Jen adds that Chinese firms hold roughly $2.5 trillion of liquid assets overseas that could be repatriated, while a further stock surge could invite more inflows. The CSI 300 has risen more than 20% since April lows.

“China’s financial assets remain undervalued but also under-owned,” he said. “Renminbi appreciation could help China attract some foreign investment back to the financial markets.”

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