Hong Kong security law: how will US sanctions affect China’s plan to turn the yuan into a widely used global currency?

Hong Kong security law: how will US sanctions affect China’s plan to turn the yuan into a widely used global currency?

  • The threat of US sanctions over Hong Kong has added urgency to Beijing’s efforts to cut its reliance on the US dollar
  • But analysts say intensifying China-US decoupling is likely to make foreign investors wary of using the yuan in place of the US dollar

Washington’s decision to impose sanctions on Chinese individuals and financial institutions for their role in developing Hong Kong’s new national security law may threaten Beijing’s efforts to make the yuan an international currency, according to analysts.

Meanwhile, some say US threats have added new urgency to Beijing’s goal of cutting its reliance on the US dollar by boosting international use of the yuan.US President Donald Trump on Tuesday signed an executive order ending Hong Kong’s special status under US law, in response to Beijing’s imposition of the national security law on the city, marking a step towards US financial sanctions against Chinese officials and banks that do businesses with them.The threat has created significant uncertainty over the future of Hong Kong as a global financial centre and flies in the face of China’s yuan internationalisation plan. The city is the bridgehead for the currency’s access to global markets, accounting for more than 70 per cent of its use in “offshore” payments, analysts said.