HONG KONG, Dec 19 (Reuters) - Investors are snapping up yuan credits and surging yuan lending is poised to overtake overseas dollar loans at Chinese banks as attractive pricing helps drive a sustained push by Beijing to put the yuan on the global stage. China's overseas bank lending has tripled in four years to 2.52 trillion yuan and sales of onshore and offshore yuan debt are at or near records for ​the second year running. Bankers say the boom is encouraged by cost, because yuan rates are low. But the ...

Geopolitical Implications - China has established independent financial infrastructure to bypass the US dollar system [1] - This infrastructure enables China to conduct international transactions without relying on the dollar [1] Yuan Internationalization - The development facilitates the use of the yuan in international transactions [1]

Core Insights - China is strategically shifting from dollar-denominated loans to yuan-denominated loans to enhance the international use of the yuan and reduce reliance on the dollar amid geopolitical tensions [3][5][21] Financial Implications - Chinese lenders can issue yuan bonds at lower costs compared to dollar debt, allowing them to lend at reduced rates without incurring significant losses [1][15] - Kenya reported a reduction of $215 million in annual debt-servicing costs by converting its Chinese railway loans from dollars to yuan [5] - Ethiopia is looking to convert part of its $5.38 billion debt to China into yuan loans, indicating a trend among sovereign nations to seek cheaper financing options [6][10] Geopolitical Context - The shift to yuan loans is part of China's broader strategy to deepen its influence in Africa and counterbalance U.S. financial dominance [3][10] - The yuan's increased role in international commerce is seen as a way to mitigate the financial advantages held by the U.S. [3][21] Global Yuan Adoption - There has been a notable increase in the issuance of yuan-denominated bonds, with a total of 68 billion yuan ($9.5 billion) issued as of October this year, doubling the total for the entire year of 2024 [8] - Countries like Hungary, Kazakhstan, and Sri Lanka are actively engaging in yuan-denominated financing, reflecting a growing trend [8][10] Economic Strategy - China's economic slowdown and deflationary pressures are prompting a loose monetary policy, making yuan loans more attractive to global borrowers [7][19] - The People's Bank of China is working to open up domestic financial markets and encourage the use of the yuan in international trade [16][17] Long-term Goals - China's ambition is to establish the yuan as a credible alternative in a multi-polar monetary system and eventually as a global reserve currency [21][22] - The ongoing efforts to promote the yuan's internationalization may require deeper financial reforms and easier access for foreign investors [22][23]

Yuan Internationalization - China has established its own financial infrastructure, enabling transactions without relying on the US dollar system [1] - This development has implications for the Chinese Yuan (CNY) [1] Geopolitical Implications - China can now engage in international transactions through various methods, bypassing the dollar system [1]

Core Insights - Chinese authorities are committed to promoting the yuan's global usage by facilitating its use for both onshore and overseas institutions [1][2] - The People's Bank of China (PBOC) aims to enhance the efficiency of cross-border trade and support the real economy through improved financial market access [2][5] - The international monetary system's diversification and rising demand for the yuan signal a favorable environment for its wider adoption [3][4] Group 1 - Beijing will support the yuan as a financing currency for foreign institutions and open up financial markets [2] - The report indicates a strategic push for internationalizing the yuan ahead of a significant Communist Party meeting [4] - China plans to enhance the transparency, standardization, and predictability of its financial markets to improve trading efficiency and liquidity [5] Group 2 - Recent policy measures include expanded access to China's bond repurchase market and a new payment system with Hong Kong [6] - The volume of capital flowing in and out of China for investment opportunities has surpassed the value of goods and services traded for the first time [6] - Despite these efforts, the yuan's global usage remains limited compared to the dollar and yen due to tight management by the PBOC [7]

Geopolitical Implications - China has established independent financial infrastructure to bypass the US dollar system in international transactions [1] - This development has implications for the internationalization of the yuan [1] Financial System - China has sorted its own financial plumbing [1] Currency - China can transact with others without touching the dollar system through a variety of means, which means for the yuan [1]

Yuan Internationalization - China has established its own financial infrastructure, enabling transactions independent of the US dollar system [1] - This development facilitates international transactions without reliance on the dollar [1] - The report suggests implications for the Chinese Yuan (CNY) [1]