Core Viewpoint - The article discusses the challenges and dynamics of the current international monetary system, particularly focusing on the role of the US dollar and the potential for the internationalization of the Chinese yuan as a response to the declining dominance of the dollar [2][6][10]. Group 1: US Dollar and International Monetary System - The US, as the issuer of the world's primary reserve currency, maintains economic prosperity by borrowing from other countries, leading to a significant accumulation of debt [3][6]. - Recent data indicates that the US GDP contracted by 0.5% in Q1 2025, primarily due to increased imports driven by tariff policies, raising concerns about the sustainability of the US economy [3][4]. - The dollar index has seen a significant decline, dropping 10.79% in the first half of the year, marking its worst performance since 1973 [4][10]. Group 2: Challenges of Dollar Dominance - The "Triffin Dilemma" persists, highlighting the conflict between the need for the US to run trade deficits to provide global liquidity and the resulting pressure on the dollar's value [6][8]. - The share of the dollar in global foreign exchange reserves has decreased from 71% in 1999 to 57.4% in Q1 2024, indicating a trend towards de-dollarization [9][10]. Group 3: Internationalization of the Chinese Yuan - The article emphasizes the strategic opportunity for the yuan's internationalization amid the multi-polarization of the international monetary system [15]. - Key measures proposed for enhancing yuan internationalization include improving the Cross-Border Interbank Payment System (CIPS), expanding currency swap agreements, and exploring more offshore yuan usage scenarios [15][16][17]. - The issuance of offshore yuan stablecoins is suggested as a new approach to promote yuan internationalization, particularly in the context of digital finance [17][18].

Report Industry Investment Rating No relevant content provided. Core View of the Report The power of bullish sentiment on the RMB exchange rate remains strong. The RMB deposit in the Hong Kong offshore market has returned to the trillion - yuan scale, and the RMB remittance related to cross - border trade settlement has increased significantly month - on - month. The RMB exchange rate is expected to continue to fluctuate strongly in the short term, and the RMB bond's allocation and trading attractiveness are expected to continue to increase [2]. Summary by Directory 1. April: Hong Kong Offshore RMB Deposit and Remittance - As of the end of April 2025, the Hong Kong RMB deposit scale was 1030.895 billion yuan, a month - on - month increase of 7.4% and a year - on - year decrease of 5.3%. The total RMB remittance related to cross - border trade settlement was 1362.144 billion yuan, a month - on - month increase of 15.0% and a year - on - year increase of 8.4%. The RMB RTGS clearing amount dropped to 58.5 trillion yuan, a month - on - month decrease of 12.7% and a year - on - year decrease of 8.1% [5]. 2. May: USD Index and RMB Exchange Rate - The USD index first rose and then fell in May. The monthly average value decreased by 0.56% compared with April, and the decline was narrower than that in April. The RMB exchange rate fluctuated upwards, and the monthly average value of the on - offshore exchange rate turned positive. In April, the foreign exchange settlement and sales surplus expanded. High - frequency data showed that the average daily trading volume of the USD/CNY spot inquiry in May increased by 13.2% month - on - month. In the short term, the RMB exchange rate is expected to continue to fluctuate strongly [2][7][11]. 3. May: Interest Rates - In May, there was no issuance of offshore RMB treasury bonds or central bank bills. The offshore RMB liquidity was abundant, and the CNH HIBOR fluctuated slightly downward. The HKD HIBOR declined significantly, and the average value of the offshore RMB - HKD interest rate spread widened. The on - shore SHIBOR continued to decline, and the average value of the on - offshore RMB interest rate spread narrowed. In the future, the SHIBOR volatility may increase stage by stage near the end of the quarter, the CNH HIBOR is expected to continue to fluctuate at a low level, and the HKD HIBOR may rise from a low level, but the probability of a significant upward trend is small [3][4]. 4. May: Swap Points and Derivatives - In May, the average values of on - and offshore RMB swap points showed different trends, and the inversion range of the on - offshore swap point spread continued to narrow. The trading volume of RMB futures on the Hong Kong Stock Exchange decreased, the open interest increased, and the settlement price strengthened. The option market continued to be bullish on the RMB exchange rate, indicating that the power of bullish sentiment on the RMB exchange rate remains strong [19][22]. 5. May - June: Offshore RMB Bonds - In May, the financing amount of offshore RMB bonds continued to decline. In April, the custody scale of overseas institutions in the inter - bank bond market rose to the highest level in nearly 7 months. Looking forward, the RMB exchange rate is expected to continue to strengthen, the probability of intensive issuance of offshore RMB treasury bonds in the short term is low, but the allocation and trading attractiveness of RMB bonds are expected to continue to increase [25][27][28].