Shifting Economic Focus
A former central bank adviser suggests that China should increase imports and settle payments in yuan to help balance its foreign trade and expand the currency’s global use.
Liu Shijin, a former member of the People’s Bank of China’s monetary policy committee, says that China’s trade strategy needs significant adjustments over the next five years to achieve a basic balance between imports and exports.
Currently serving as the Chinese Chief Advisor for the China Council for International Cooperation on Environment and Development (CCICED), among other positions, Liu noted that China should undertake a major shift in its foreign trade strategy over the next five years. While the country adopts this change, he emphasized the importance of achieving a basic balance between what is imported into China and what it exports. Liu made these remarks during a speech last week.
New Economic Strategy and Global Yuan Use
Liu pointed out that China had a trade surplus of approximately $1 trillion in 2024. Therefore, he elaborated that, “If China can bring in more goods and services worth that amount and pay with yuan, it will greatly increase the liquidity of offshore yuan.”
As a prominent Chinese economist and Vice Chairman of the China Development Research Foundation, Liu noted that backing a considerable increase in the yuan’s value would help establish the currency as more popular globally. He also noted that this shift in strategy will enhance the purchasing power of Chinese residents when they travel internationally and promote spending.
Following his statement, sources highlighted that although Liu’s point of view may not represent official policies, it indicates escalating international pressure on China to balance its trade.
International Pressure and Trade Imbalances
Considering the intense nature of the situation, reports indicate that French President Emmanuel Macron recently issued a warning, implying a high likelihood that the European Union might consider implementing strong measures against China. These measures included the possibility of imposing tariffs. Macron made clear that this decision will only be applicable if Beijing continues to ignore its surging trade imbalance with Europe.
The EU’s goods trade deficit with China has surged nearly 60% since 2019, and France’s own trade gap with the $19 trillion economy continues to widen. Macron has long pushed for a united European approach to China and has repeatedly called for stronger safeguards to protect European industries from Chinese imports.
Macron noted that U.S. protectionism and China are both striking at the core of our industrial and innovation model. And that, he said, was the worst-case scenario: he added that they had become the adjustment market. Macron warned that it was a matter of life or death for European industry.
Beijing's Response and Domestic Spending
In response, Beijing pledged to implement an effective strategy to boost domestic spending over the next five years. With this strategy, the city aims to lower its reliance on exports.
Moreover, sources revealed that China’s top leaders have publicly stated their intentions to improve local demand. They promised to make this plan their primary focus for 2026 to safeguard the economy from global risks associated with trade. These sources outlined this plan, citing a report from the Communist Party’s decision-making Politburo.
Economic Adjustments and Yuan's Global Role
China is currently undergoing a gradual change in its economy. To support this claim, recent economic reports noted that retail sales in the country declined for the fifth consecutive month in October. This situation occurred despite a surge in exports, which caused China’s trade surplus to surpass $1 trillion last month.
At the same time, the state has reported taking a tough stance on increasing the yuan’s global prominence, particularly as the dollar faces challenges due to financial difficulties and concerns about the Federal Reserve’s independence.
To accelerate the process of increasing the yuan’s popularity, Liu suggested that the country should launch more financial products in offshore markets and price them in yuan. Some of the products the prominent Chinese economist mentioned included bonds, stocks, funds, and derivatives.
According to Liu, “the share of yuan usage around the world should rise to reflect the importance of the Chinese economy better.” Notably, he served as an adviser on monetary policy for the People’s Bank of China from June 2018 to March 2024.