The governor of China’s central bank outlined a plan on Wednesday for a global financial system that relies on several major currencies, not just the dollar, as Beijing steps up its campaign to weaken the U.S. dollar’s primacy.
Pan Gongsheng, the governor of the People’s Bank of China, did not mention the dollar by name but gave an extended critique of the potential dangers of international reliance on a single country’s currency.
In a coded reference to the United States, Mr. Pan cited the dangers posed by fiscal and regulatory problems in the country issuing the world’s main currency.
These problems may “overflow to the world in the form of financial risks, and even evolve into an international financial crisis,” he said.
The Trump administration has spoken about weakening the dollar against other currencies to make U.S. exports more attractive to buyers abroad. The dollar has weakened considerably this year, including an 11 percent decline against the euro.
A weaker dollar could help narrow the American trade deficit. But it also has the potential to increase the cost of U.S. government borrowing amid ever-rising federal budget deficits.
China has kept the value of its currency, the renminbi, tightly linked to the dollar. That has meant it has fallen along with the dollar, making the price of China’s exports even more competitive in Europe, a major trading partner, and elsewhere.
The dollar is by far the primary currency used in global trade, including when China is involved, followed by the euro. The renminbi has grown in use in recent years but remains a minor player in international trade.
Mr. Pan warned that a country with a dominant currency inevitably seeks to unfairly “weaponize” it during geopolitical conflicts. China is closely aligned with Russia, Iran and North Korea and has objected to American measures aimed at choking off commerce with those countries.
China buys practically all of Iran’s oil exports and much of Russia’s oil and gas exports, and conducts these transactions through small Chinese banks and companies that have little need for dollars.
The strength of the dollar lies partly in its widespread use in financing international trade. Banks often rely on long-established procedures that are tied to the dollar, including some that still send faxes. Mr. Pan took aim at these arrangements, calling for more cross-border payments to use emerging technologies, including China’s digital renminbi. That could make it easier to experiment with transactions in currencies other than the dollar.
Mr. Pan and other top Chinese officials spoke on Wednesday at the opening in Shanghai of the Lujiazui Forum, the main annual gathering of China’s financial policymakers and executives.
China faces formidable obstacles in promoting the renminbi as an alternative to the dollar. One of the biggest is that China has a huge and still rising trade surplus. As a result, much of the renminbi in overseas circulation is typically used to buy more Chinese goods or pay debts to China.
In addition, China tightly restricts how renminbi can be moved in or out of the country. The goal is to prevent Chinese companies and households from sending their savings to other countries for safekeeping or better financial returns. But these restrictions make the renminbi an ineffective way for foreigners to store value.
Beijing has in recent years persuaded developing countries to settle some of their trade balances with China in renminbi.
“China is not globalizing the renminbi in the Western sense, but regionalizing it — embedding the currency in trade, payments, and state-to-state ties, particularly across the Global South,” said Dan Wang, a China economist in the Singapore office of the Eurasia Group.
Mr. Pan conspicuously did not mention the financial struggles of China’s consumers in his remarks on Wednesday. Neither did Chen Jining, the Politburo member who is the Communist Party leader of Shanghai. He gave the opening speech at the forum and focused on the role of China’s financial sector in bankrolling investment in scientific and technological innovation.
The government-controlled banking sector has rapidly ramped up lending to manufacturers of electric cars, solar panels and other advanced technologies. At the same time, a collapse in the country’s housing market has dealt a severe blow to consumer spending.
Much of the country’s urban middle class has lost their life savings as apartment prices have fallen by a third to half. Prices started to plunge in 2021 after the government moved to address a decades-long speculative bubble that had driven real estate up as much as 20-fold in many cities, leaving new apartments unaffordable for many people.
Faint hints of a stabilization in consumer spending have emerged recently. Retail sales rose 6.4 percent in May from the same month last year, which was more than most economists had expected.
But that gain, revealed in data issued by China’s National Bureau of Statistics on Monday, was propelled by sharp increases in a few categories of products made mainly in China, like household appliances, that have become eligible for government trade-in subsidies.
Li You contributed research.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He has lived and reported in mainland China through the pandemic.
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