China Is Pitting the Yuan Against the Dollar. So Far, It’s Not Going to Plan.

SHANGHAI—China’s progress in boosting international use of its currency is stalling. The yuan was the eighth most traded currency this year, being on one side of just 4.3% of foreign exchange trades by turnover world-wide, according to data published Monday by the Bank for International Settlements. That ranking was unchanged from the previous survey three years ago as the BIS said the value of yuan trading has only grown “in line” with other emerging-market currencies, although China now hosts more forex dealing. China’s currency has failed to rise in the rankings even as Beijing has promoted the yuan as a core element of its international political engagement, and officials talk of positioning it as an alternative to the U.S. dollar for trade and finance.

While foreign-exchange trading is only one measure of a currency’s acceptance and usefulness, the stagnation points to international skepticism about the tight control that the world’s second-largest economy maintains over its currency. As President

Xi Jinping

has toured the globe in recent years, China’s government-run banks have lent billions of dollars in yuan to other countries and welcomed the development of markets trading yuan bonds. Beijing has cheered Hungary for raising money in yuan, and Russia’s central bank for saying it would hold more foreign-exchange reserves in yuan.

The International Monetary Fund three years ago endorsed China’s strategy by formally giving the yuan a “reserve” status on par with the dollar, euro, yen and pound—even though markets have historically embraced free-floating currencies. Yet the Switzerland-based BIS’s long-running study showed that 88% of the $6.6 trillion in daily foreign-exchange turnover this April still included the U.S. dollar. Rankings of the next seven most actively traded currencies didn’t change compared with 2016. Emerging-market currencies continued to gain in usage with 25% of global turnover, closing in on the euro at 32%. In value terms, yuan activity rose 40% to $284 billion, but unlike in previous surveys, the yuan’s growth didn’t outpace the wider market enough for it to rise in the rankings. A major obstacle in China’s ambitions: Beijing’s tight control, with a system it calls “managed convertibility” to keep the currency stable and the financial system safe. Events starting in mid-2015 also undermined market trust, including a botched currency devaluation after a stock crash. Yuan selling helped cut the central bank’s reserves by about $1 trillion in a little over two years. China sharply curtailed channels for investing and exchanging the currency, including making it harder for citizens to spend yuan when they traveled or studied overseas.

“As the renminbi weakened after mid-2015, so too did the market’s willingness to own it and use it,”

David Lubin,

head of emerging markets economics at


said in a March report, using another name for the yuan. “That’s hardly the mark of a global reserve currency.” When enthusiasm about an internationalized yuan peaked, about the time of the IMF endorsement, almost 30% of Chinese trade was settled in yuan, Hong Kong banks held deposits of 1 trillion yuan and issuance of yuan-denominated “dim sum” bonds totaled nearly $10 billion a month, the Citigroup research showed. More recently, it says, the trade figure has halved, deposits are down 40% and bond issuance has slipped to a 10th of its highs. The BIS data underscore the disconnect between China’s huge economy and limited activity in its currency. Use of the Hong Kong dollar has risen much faster—indicating sustained global interest in doing business in China, just not with its currency. Under the weight of a fast-decelerating Chinese economy, the yuan has been slipping. In August, the central bank let it fall below 7 to the dollar for the first time since 2008, prompting the Trump administration to label Beijing a currency manipulator. China has grown as a center for foreign exchange trading, with an 86% increase in trading turnover from 2016, far outpacing a 27% global rise, the BIS survey said. Still, this represents just 1.6% of the global total this year, and only a fifth of Hong Kong’s turnover. Write to James T. Areddy at

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