(Yicai) Nov. 24 -- China plans to advance yuan internationalization and raise capital account openness under the 15th Five-Year Plan (2026-2030) recommendations, and this effort will rely fundamentally on six key supporting reforms that form the backbone of a stable and long-term global role for the currency.

High-level openness, however, must proceed in step with deep structural reforms. The six supporting reforms set out in the plan form the essential guarantees for the yuan’s stable and long-term global development and are also critical for balancing development with security.

China has already achieved notable progress in yuan internationalization. By the end of 2024, the yuan ranked fourth in global payments and third in trade financing, and cross-border payments grew 23 percent year-on-year. At the same time, credit cracks in the US dollar prompted by American policy choices have created a rare opportunity for non-US currencies.

Yet financial openness carries characteristics of market overshooting and multiple equilibria that demand far stronger supportive reforms than those required for trade opening; past episodes, such as the Asian financial crisis, highlight how delayed reforms amid greater openness can ultimately trigger systemic risks.

Looking ahead, the progress of opening must be dynamically assessed and adjusted with prudence. Opening is a means rather than an end, and yuan internationalization cannot be pursued for its own sake.

The six supporting reforms provide the central framework for advancing the internationalization of the yuan.

First, strengthening the domestic economic circulation system forms the foundation. Expanding domestic demand and building a unified national market are essential to fully unleash China’s ultra-large market advantages.

Second, enhancing technological innovation capabilities is the principal driving force. The 15th Five-Year Plan recommendations call for building a modern industrial system, strengthening original innovation and breakthroughs in critical core technologies, and promoting deep integration between technological and industrial innovation to overcome bottlenecks and lift industries toward the high end.

Third, improving the property rights protection system is vital. Competition between countries reflects both hard and soft economic power, and the degree of property rights protection is central to soft power. A clear and robust protection system can attract capital from both domestic and international sources.

Fourth, enhancing macro governance effectiveness is crucial. The core task of market-oriented reform is to appropriately manage the relationship between the government and the market. This requires stronger coordination across fiscal, tax, and financial policies and the establishment of a market-oriented exchange rate formation mechanism to reinforce risk prevention.

Fifth, improving modern corporate governance forms the micro-level basis for reform. Better governance can regulate corporate behavior and help reduce involutionary competition.

Sixth, strengthening capital market functions is essential. As an important vehicle for the yuan, a more inclusive and effective capital market can enhance the value and attractiveness of yuan-denominated assets.

Recent regulatory actions align closely with these reform priorities. Shanghai’s plan to facilitate cross-border financial services aims to improve settlement efficiency and financing support, while reforms to the Qualified Foreign Institutional Investor system broaden investment scopes and streamline access. These steps reinforce key reform directions, but reforms must not be rushed; rigorous assessment and cautious verification are needed to calibrate the pace of opening.

Only by implementing these six core reforms and achieving a dual-wheel drive of reform and opening can the yuan internationalization progress steadily under the premise of security. This approach allows China to seize the historic opportunity created by shifts in the global monetary system and to provide solid financial support for Chinese modernization.

Editor: Emmi Laine