MNI INTERVIEW: Mid-East Conflict Is Chance To Promote Yuan Use

The upheaval in the Middle East presents China with a strategic opportunity to promote the use of the yuan for cross-border settlement and as a safe haven for international investors, a former vice governor of the People’s Bank of China told MNI in an interview.

Though the duration and outcome of the Iran conflict remain uncertain, its impact on the international political and economic landscape will reshape the global monetary order, said Chen Yulu, vice governor of the PBOC from 2015 to 2022 and now a deputy to the 14th National People's Congress, the country’s top legislature, as well as president of Nankai University.

Chen said the U.S.-Israeli attack on Iran will further erode the credibility of the dollar, at a time when the yuan’s cross-border investment and financing functions continue to deepen, supported by low PBOC policy rates compared with the Federal Reserve’s, and by a stable exchange rate. (See MNI INTERVIEW: China’s Yuan Needs Greater Flexibility – Huang)

China’s 2026 Government Work Report presented by Premier Li Qiang last Thursday called for ”expanding the cross-border use of the yuan,“ Chen noted, adding that it has become the primary settlement currency for China's external payments and receipts and the third-largest global payment currency, with a total of CNY26.32 trillion in cross-border RMB settlement under China’s current account and direct investment in 2025. 

It is also the world’s second-largest trade-financing currency, with cross-border RMB finance reaching CNY1.4 trillion in 2025, he said.

This is occurring at a time when the U.S. actively pursues a weak dollar within an unpredictable policy framework, while Europe’s economic recovery is lacklustre, exacerbating a shortage of global safe assets, Chen said. By the end of 2025, domestic yuan-denominated assets held by overseas institutions and individuals exceeded CNY10 trillion, he added. (See MNI: Yuan To Track Dollar Higher, Fixing Stable-China Traders)

In answer to a question from MNI, PBOC Governor Pan Gongsheng told a briefing last Friday that the central bank will promote the yuan’s cross- border payment system and enhance the convenience of cross-border trade and investment and financing activities as part of the process of advancing yuan internationalisation. The governor also noted that geopolitics has created new momentum for the transformation of global financial governance.