Dollar-Pegged Tokens Beat Yuan 80:1 – Can China’s Stablecoin Strategy Close Gap?

A stablecoin strategy is necessary for the Chinese yuan to increase its international influence and counter the dollar’s overrepresentation in global finance, according to an article published by Zhongtai Financial International Chief Economist Li Xunlei on July 1.

Li writes that the dollar’s dominance is partly sustained by its extensive role in stablecoin issuance. Over 80% of the world’s stablecoins are pegged to the U.S. dollar, which he says contributes to excessive dollar liquidity. By contrast, the yuan remains underrepresented in cross-border payments, trade finance, and reserves.

Li Calls for CNY Stablecoin Strategy

The Chinese yuan’s market exchange rate is undervalued compared to the country’s purchasing power parity (PPP), Li states in the piece. “This undervaluation is mainly due to the renminbi’s insufficient global liquidity, which results in an elevated liquidity premium,” said Li.

He notes that while other jurisdictions are advancing regulatory frameworks for stablecoins, citing recent developments in the U.S. and Hong Kong, China has yet to introduce formal legislation.