THE INTERNATIONALISATION OF YUAN: IMPLICATIONS FOR PAKISTAN’S ECONOMY

The internationalisation of the Chinese Yuan has been a significant global economic development since 2010. As China’s second-largest economy in the world continues to expand, the Yuan’s global role has evolved, marked by an increasing use in global payments and trade finance. The drive toward Yuan’s internationalisation is shaped by China’s strategic efforts to expand its financial market. However, this process is set to encounter persistent challenges, particularly due to structural limitations within China’s economy, such as capital controls and the lack of a fully convertible currency. While on one hand, these barriers seem to limit the Yuan’s appeal as a dominant global reserve and investment currency, its role in global trade is growing nonetheless. This, in turn, generates debate about the Yuan’s projected internationalisation trajectory and its impact on the global economic landscape. Within this context, this paper aims to assess the current status of Yuan’s internationalisation, predict its future trajectory, and examine its potential implications for Pakistan’s economy. Through an in-depth qualitative analysis of secondary data present in academic literature and policy reports, the paper seeks to answer two central questions, first regarding the current status of Yuan’s internationalisation and the possible implications of Yuan’s internationalisation for Pakistan’s economy. By analysing the opportunities and challenges presented by a more internationalised Yuan, this study provides valuable insights for policymakers and businesses in Pakistan, considering the evolving role of China in the international monetary system.