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China's central bank and finance ministry have discussed creating a better mechanism for issuing sovereign debt overseas, as Beijing eyes a greater global role for the yuan amid wavering confidence in the US dollar.

Beijing has been upping efforts to increase the use of its currency in international markets in recent months, as trading in US dollar assets becomes increasingly volatile amid President Donald Trump's tariff blitz, aggressive spending plans, and attempts to interfere in the workings of the Federal Reserve.

In a joint meeting attended by Liao Min, China's vice-minister of finance, and Zou Lan, deputy governor of the People's Bank of China, both sides said that coordinated fiscal and monetary policy measures were necessary to assure markets and help the economy navigate a "complex and volatile market environment".

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No more details about the bond issuance mechanism were provided in the meeting readout.

"China's policy direction to promote the internationalisation of the yuan is quite clear," said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, pointing to recent calls from Pan Gongsheng, China's central bank governor, for a global payment system to reduce dependence on a single currency.

"I think the increased issuance of offshore yuan-denominated treasury bonds in the future is foreseeable," Zhang added.

Despite Beijing's attempts to position itself as a safe harbour amid US market volatility in recent months, usage of the yuan in cross-border payments, commodity pricing and foreign exchange reserves remains low for now.

Only 2.88 per cent of global payments were made using the yuan in July, whereas 48 per cent were made using the US dollar, according to data from the Society for Worldwide Interbank Financial Telecommunication (Swift) interbank messaging service.

Similarly, the yuan accounted for 2.12 per cent of global foreign exchange reserves in the first quarter of 2025, compared with nearly 58 per cent for the US dollar, data from the International Monetary Fund showed.

Building a strong offshore market for the yuan is viewed as vital to helping the currency gain ground on global markets, with Beijing likely to reaffirm its goal of driving forward yuan internationalisation in its next five-year plan.

China's Ministry of Finance first issued offshore yuan-denominated treasury securities in 2009, releasing 6 billion yuan (then US$878 million) of the bonds in Hong Kong. This year, the ministry has released 68 billion yuan of treasury securities in the city, which has become a major hub for offshore yuan trading.

Beijing has also been selling treasury bonds in Macau for the past four years, releasing 6 billion yuan of the securities in the territory in July.

Other overseas markets, including Singapore, London and Luxembourg, have also seen issuances of offshore yuan-denominated bonds.

On Thursday, the yield on China's 10-year offshore yuan-denominated sovereign bonds stood at 1.89 per cent, while the 30-year bond yield reached nearly 2.4 per cent.

China's finance ministry and central bank first held a joint meeting in October 2024, when both sides focused on the central bank's operations in treasury bond trading and overseeing the bond market.

The central bank resumed purchasing government bonds - a tool it had not used for nearly 20 years - last August, but suspended purchases again in January, citing "persistent supply shortages in the government bond market".

The topic was discussed again during the joint meeting, as well as the functioning of financial markets and government bond issuance management.

Both sides also pledged to deepen coordination and continue "driving the steady and healthy development of China's bond market", according to a central bank statement released on Wednesday.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.