Harvard economist Kenneth Rogoff has indicated that China’s efforts to elevate the yuan as a global reserve currency have reached a critical stage, citing President Xi Jinping’s explicit support for yuan internationalization as a significant milestone. Rogoff, who previously served as chief economist at the International Monetary Fund and is recognized for his expertise in international finance, emphasized that mounting interest among global investors to diversify away from the US dollar creates a strategic opening for China’s move.
China’s ongoing steps toward yuan internationalization
In a recent interview, Rogoff outlined several major steps Beijing must complete to solidify the yuan’s status. He highlighted the importance of increasing access for foreign investors to China’s government bond markets, which would open the door to broader international participation.
Rogoff suggested that China does not need to fully liberalize capital markets for the yuan to attain reserve currency status, drawing a parallel to the US dollar’s dominance through the 1970s despite ongoing foreign investment restrictions at the time.
The economist identified forward markets and interest rate swaps as essential mechanisms for facilitating cross-border trade in the yuan, arguing their development would build confidence among institutional investors.
Modern financial infrastructure—specifically, systems that operate independently from the SWIFT network—was another area Rogoff deemed crucial. He pointed to China’s Cross-border Interbank Payment System (CIPS) and advancements in blockchain technology as key foundational tools in this effort.
Should these initiatives progress, Rogoff believes that China could establish the yuan as a reserve currency within a five-year horizon, accelerating trends that have already been gaining momentum under Xi Jinping’s leadership.
The influence of crypto and the changing nature of illicit finance
Rogoff offered a detailed perspective on the changing landscape of monetary competition, focusing on how digital assets have fueled shifts in illicit financial activity. He estimated the global underground economy to reach approximately $20 trillion, suggesting that stablecoins and other cryptocurrencies already represent a significant segment of this space—supplanting the traditional dominance of physical cash.
In his analysis, the speed and difficulty of tracing crypto transactions have made these digital tools increasingly attractive for unauthorized transfers. Rogoff noted that as cryptocurrencies continue to evolve, their role in shadow finance will likely grow, even as authorities try to regulate or limit these channels.
Regulatory challenges around stablecoins and digital competition
Despite crypto’s growing impact, Rogoff maintains that digital currencies will not displace the dollar for lawful, large-scale international commerce. He stressed that governments possess sufficient regulatory authority to contain the reach of cryptocurrencies in regulated markets.
Rogoff expressed concern over certain legislative approaches—like the US Genius Act—calling current stablecoin regulation too lenient. He pointed to the tracing challenges posed by stablecoins and urged tighter oversight in line with central bank digital currency frameworks.
Overall, Rogoff observed that the global contest for monetary influence is intensifying, with both Europe and China accelerating efforts to develop systems that reduce dependency on the US dollar and mitigate vulnerabilities to American sanctions.
