The Murky Future Of Thailand’s Pheu Thai Party

Political

Summary:

As Thailand contends with the external heat of the Thai-Cambodian conflict, the domestic political temperature is rising.

As Thailand contends with the external heat of the Thai-Cambodian conflict, the domestic political temperature is rising. With a new general election looming dangerously close, parties are scrambling to give themselves a facelift and undercut opponents' leverage.

The populist Pheu Thai Party that led Thailand's government from August 2023 until August of this year, when its then-leader and Prime Minister Paetongtarn Shinawatra was removed for an ethics violation, may well have the deepest pockets under the wealth-bloated Shinawatra family. The party's electoral appeal, however, looks terribly thin with neither powerful policy pledges nor inspiring leadership in sight.

One might question the value of studying how parties appeal to voters when "grand compromises" – bargains and backroom deal-making among political elites – have grown pivotal in determining who secures governing power. At the same time, one might argue that parties must secure a promising vote share in the first place to have the upper hand in any bargain.

Pheu Thai, like Thai Rak Thai and the People's Power Party before it, functions as a vehicle for polarizing former Prime Minister Thaksin Shinawatra. Thaksinite parties have commanded the mass rural-majoritarian vote for much of the 21st century thus far, by delivering transformative yet straightforward benefits like universal health coverage. Then came the post-2023 election environment – building on a 2019 election that was marked by constitutional engineering and the proliferation of new parties – where parties trade partisan identity and ideology for power-sharing. Pheu Thai allied with the very forces it was supposed to challenge for coalition formation and retention: with military-backed parties in 2023, and with its longtime conservative nemesis, the Democrat Party, in 2024.

Perhaps the disappointment could have been compensated with tangible policy achievements. Unfortunately for Pheu Thai, its much-touted economic promises have gone unfulfilled and are questionable by design, seen as short-sighted stimulus packages that cannot begin to address deep structural woes. These include the 10,000-baht "digital" wallet handout and the 20-baht flat fare on Bangkok mass transit lines. More disastrous is Pheu Thai's far-from-passing-grade handling of security matters, as manifested in Paetongtarn's compromising appeasement of Cambodian Senate President Hun Sen, as revealed in the leaked call that ended her tenure as prime minister. Even before the flare-up with Cambodia, Pheu Thai's approach to border security was already poor.

All of this culminated in Pheu Thai's two consecutive by-election defeats, in Sisaket's Constituency 5 in September and Kanchanaburi's Constituency 4 in October, to its ally-turned-rival Bhumjaithai, now also at the helm of Thailand's government. Sisaket has traditionally been a Pheu Thai stronghold. It is also a province that borders Cambodia, where the strategic escarpment of Phu Makua and the famous Preah Vihear temple lie, putting on display the impact of weak border management on electoral popularity.

So long as tensions with Cambodia linger, conversations will revolve back to the "fuel" — the conflict-of-interest allegations between Paetongtarn's father, Thaksin, and Hun Sen, which have significantly damaged Pheu Thai's image. Relatedly, more budgets will likely be poured into defense, especially in the context of Thailand's military modernization program having been slow-moving. Shrinking fiscal space in other areas, coupled with Pheu Thai's lack of credibility from unfulfilled promises that are still fresh in people's minds, will make the rollout of another bold populist project difficult.

Pheu Thai could, of course, run on much-needed reform-focused promises, which are increasingly crucial for sustaining Thailand's existing socio-economic system. One area that would make particular sense is to stabilize the universal healthcare system advanced by Thaksin years ago, which has become seriously strained by Thailand's aging population and its understaffed medical system. The latter is driven by low pay and the uneven distribution of manpower between Bangkok and the provinces, among other issues. But Pheu Thai has little incentive to bet on incrementally visible policies in a system where civilian administrations' life spans are short. The payoffs could well end up being attributed to other parties.

So policy-wise, Pheu Thai's direction is foggy, even more so when compared with its key competitors. Bhumjaithai has adopted tough rhetoric and a military-led security posture in line with the heightened nationalist sentiment attached to the border dispute. Moreover, the party has shown a knack for being action-oriented by putting capable people in the right roles (leaving aside the dubious credentials of some cabinet members). The "outsider ministers," meaning non-party members, appointed by Bhumjaithai are well regarded by the public. These include the appointment of Suphajee Suthumpun, a successful private sector executive, as commerce minister, career technocrat Ekniti Nitithanprapas as finance minister (both are poised as Bhumjaithai's prime ministerial candidates), and seasoned diplomat Sihasak Phuangketkeow as foreign minister.

The People's Party, meanwhile, has centered its election campaign on fighting "grey money." This resonates with reformists, who call for greater transparency in governance, and segments of conservative nationalists, who see the entanglement of some Thai officials in transnational scam networks as hindering Thailand's capacity to deploy anti-scam measures against neighbors like Cambodia, where such networks are entrenched.

In terms of leadership, Pheu Thai faces a dilemma between projecting independence by appointing non-Shinawatra leadership and preserving the family's commanding influence within the party. Whoever leads the party, it will likely be bland old wine in a new bottle. Paetongtarn has been replaced as Pheu Thai's leader by Julapun Amornvivat, the 50-year-old former deputy finance minister, the main architect of the unsuccessful digital wallet scheme, and a Shinawatra loyalist. Julapun will likely be one of Pheu Thai's three prime ministerial candidates for the upcoming election. The other two names have been kept under wraps, though suggestions have pointed to Thaksin's son-in-law, business executive Nuttaphong Kunakornwong, and Thaksin's nephew, Associate Professor Yodchanan Wongsawat.

As things stand, the coming election will test voters' loyalty to the Shinawatra brand. Some observers say Thaksin's decision to finally serve his jail term rather than once again running away, coupled with a barrage of legal cases against him, has revived sympathy among Pheu Thai's old partisan base. Others disagree, arguing that Thaksin's legal battles, particularly the recent ruling that he should pay the hefty sum of 17.6 billion baht ($542.37 million) in back taxes, leave him far too distracted to steer the party.

Either way, Pheu Thai appears confined to just two paths: decline further or stagnate by shoring up a faithful support base. Expecting electoral gains in the current circumstances would be wishful thinking.

Source: The Diplomat

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Gerik

Economic

A Fragile Trade Truce Under Pressure

The European Union has intensified diplomatic efforts to protect the integrity of the July 2025 trade agreement with the United States, which was designed to ease long-standing tariff tensions. At the core of the latest discussions held on November 24 in Brussels is the EU’s demand for Washington to reduce its punitive 50% tariffs on steel and aluminum and to remove remaining duties on sensitive EU exports such as wine, spirits, olives, and pasta.

The July deal had marked a cautious turning point. Under its terms, the US agreed to lower overall tariffs on most EU goods to 15%, while the EU eliminated several duties on American products. However, the recent expansion of U.S. steel and aluminum tariff applications now encompassing hundreds of derivative goods since mid-August has reignited friction.

Widening Tariff Scope and Political Risks

The U.S. Department of Commerce’s decision to broaden the 50% tariff regime threatens to reverse the limited gains achieved just months ago. EU diplomats fear a domino effect, with potential future duties targeting other critical goods such as commercial trucks, rare minerals, aircraft components, and wind turbines.

This expansion raises not just economic concerns, but a strategic one as well: the potential erosion of EU confidence in the trade truce. As EU Trade and Economic Security Commissioner Maros Sefcovic stated, while dialogue is progressing, there remains “much more to be done,” particularly on metals and derivative goods.

The concern is not only economic in nature but geopolitical: with growing pressure from China and uncertainties surrounding U.S. protectionist tendencies, the EU sees trade stability with the U.S. as a pillar of its economic and diplomatic positioning.

EU Push for Restoring Pre-Trump Tariff Norms

Beyond steel and aluminum, the EU is calling for a broader return to pre-2018 tariff conditions, particularly for lifestyle and agricultural goods. Wine, spirits, olives, and pasta sectors with strong symbolic and economic ties to European identity remain affected by residual tariffs introduced during the Trump administration.

In addition, the EU aims to expand transatlantic cooperation into regulatory areas such as auto standards and joint energy procurement frameworks. These proposals are meant to reduce dependency on third-party suppliers and to build a common resilience framework in the face of export restrictions especially from China.

No Breakthrough Expected Yet, But Stakes Remain High

While the Brussels talks are unlikely to yield immediate breakthroughs, they serve to reinforce the EU’s commitment to salvaging the July 2025 trade framework. The emphasis is not just on tariff removal, but on preventing further escalation and cementing a more balanced trade dynamic.

The political calculus is clear: allowing tariff tensions to fester could unravel hard-won cooperation and further complicate the EU’s economic transition goals, particularly those tied to green energy, industrial reform, and critical supply chain diversification.

The Clock is Ticking on EU-US Trade Stability

As trade tensions persist, the EU is navigating a narrow path between preserving diplomatic momentum and confronting the risk of renewed protectionism from Washington. The steel and aluminum tariffs remain a litmus test for the Biden administration’s trade posture in the run-up to a volatile election year.

Whether through negotiation or pressure, the EU is signaling that stable transatlantic trade relations must go beyond symbolism. They require tangible, verifiable action on tariff reduction and cooperative mechanisms for responding to global supply shocks. Without this, the fragile framework of July 2025 may prove to be a short-lived detente rather than a durable reset.

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James Whitman

Political

Russia-Ukraine Conflict

U.S. Army Secretary Dan Driscoll held talks with Russian officials in Abu Dhabi on Monday, a U.S. official told Reuters, the latest effort by President Donald Trump's administration to broker a peace agreement between Russia and Ukraine.

The meeting comes after U.S. and Ukrainian officials sought to narrow the gaps between them over a plan to end the war in Ukraine, agreeing to modify a U.S. proposal that Kyiv and its European allies saw as a Kremlin wish list.

The U.S. official, speaking on the condition of anonymity, said Driscoll's talks would continue into Tuesday. It was unclear who would be in the Russian delegation.

The official added that Driscoll was also expected to meet Ukrainian officials while in Abu Dhabi.

The White House did not immediately respond to a Reuters request for comment.

U.S. policy toward the war in Ukraine has zigzagged in recent months.

Trump's hastily arranged Alaska summit with Russian President Vladimir Putin in August spurred worries Washington might accept many Russian demands, but ultimately resulted in more U.S. pressure on Russia.

The latest U.S. peace proposal, a 28-point plan, caught many in the U.S. government, Kyiv and Europe off-guard and prompted fresh concerns that the Trump administration might be willing to push Ukraine to sign a peace deal heavily tilted toward Moscow.

The plan would require Kyiv to cede more territory, accept curbs on its military and bar it from ever joining NATO, conditions Kyiv has long rejected as tantamount to surrender. It would also do nothing to allay broader European fears of further Russian aggression.

The sudden U.S. push raises the pressure on Ukrainian President Volodymyr Zelenskiy, who is now at his most vulnerable since the start of the war after a corruption scandal saw two of his ministers dismissed and as Russia makes battlefield gains.

Source: Reuters

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Gerik

Economic

A Sudden Shock That Shattered an Export Engine

The U.S. tariff hike to 50% comprising a 25% baseline tariff and an additional 25% penalty tied to India’s purchases of Russian oil has rapidly destabilized India’s textile sector. With the U.S. absorbing $37 billion of India’s textile exports in 2024, the causal impact is direct and immediate: order inflows have collapsed, production capacity has shrunk, and thousands of workers now face income uncertainty.

Tiruppur, which accounts for 68% of India’s knitwear exports and employs roughly 800,000 workers, is the epicenter of this crisis. The region’s dependence on the U.S. market is substantial 35% of its monthly output, equivalent to 15 billion rupees, flows directly to American buyers. When the tariff spike took effect on August 27, export volumes plunged by 10.34% in September and another 12.91% in October, marking one of the steepest falls in the past decade.

Margins Collapse as Buyers Pull Back

The tariff’s economic transmission mechanism is clear: the effective duty rate jumped far beyond comparable levels for competitors such as Bangladesh, Pakistan, Sri Lanka, and Myanmar, who face tariffs around 19–20%. Even the original 25% increase had already eroded margins, which typically range only between 5–10%. But the additional 25% penalty effectively destroyed the ability of Indian exporters to price competitively.

The consequences are evident in individual case studies. Raft Garments, a family-run exporter supplying major U.S. labels like Nautica and Skechers, saw its annual order volume cut from 2 million units to barely 500,000. The remaining 1.5 million units initially under negotiation have been indefinitely shelved. Similar stories reverberate across Tiruppur, where factories have draped idle machinery in blue tarpaulins, symbolizing paralysis across the cluster.

Production Cuts and Labor Distress: A Social Crisis Emerges

The collapse in demand has triggered cascading effects on employment. Firms have reduced operating capacity to one-third, merged shifts, and refrained from rehiring migrant workers after the Deepavali holidays due to a lack of work. Raft Garments, once operating 15 production lines, now runs only 5, employing just 84 of its original 250 workers.

This is not a headline-grabbing mass layoff, but a slow-burn erosion of livelihoods. Daily-wage and piece-rate workers primarily women and Dalit communities are the most vulnerable. Their workload has fallen sharply, tightening household finances and prompting reverse migration back to home villages.

The link between trade policy and labor outcomes is therefore causal and immediate: the tariff shock constricts export demand, forcing production cuts and reducing labor absorption.

Businesses Scramble for New Markets But Substitutes Are Limited

New Delhi has urged exporters to diversify beyond the U.S., but entrepreneurs emphasize that textile supply chains cannot be reoriented overnight. Establishing new buyer relationships in Europe, Africa or the Middle East often takes months or years and rarely matches U.S. order volume.

Some business owners are exploring radical strategies setting up production abroad in Bangladesh or Vietnam to circumvent tariffs. This indicates a structural, not cyclical, rupture: the industry is considering geographical realignment of manufacturing capacity, a sign of deep vulnerability in India’s textile value chain.

A Political Problem Requires a Political Solution

Industry associations argue that no amount of domestic cost-cutting can offset a 50% tariff. The central government’s 200-billion-rupee credit package offers temporary liquidity, but risks increasing leverage in a sector already burdened by thin margins and high labor intensity.

Exporters insist the only meaningful remedy lies in diplomacy. The tariff, fundamentally geopolitical in nature, can only be reversed through a renegotiated trade arrangement. The survival of thousands of firms now hinges on the outcome of ongoing U.S.–India discussions.

Structural Weaknesses Laid Bare

While the tariff shock was externally triggered, it has revealed fundamental internal weaknesses. Many Tiruppur factories still operate with machinery from the 1990s, while global buyers increasingly demand advanced textiles with antimicrobial, moisture-wicking, and stain-resistant properties. As competitors invest aggressively in innovation, India remains stuck in a volume-driven, low-margin model.

This is a correlational insight with long-term implications: outdated technology does not directly cause tariff exposure, but it amplifies vulnerability when external disruptions occur. A technologically modernized industry would have had stronger pricing power and better resilience.

Reinvention Is No Longer Optional

The crisis gripping India’s textile industry is both an external shock and an internal reckoning. U.S. tariffs have dealt the immediate blow, but the sector’s fragility stems from years of underinvestment in technology, overdependence on a single market, and limited strategic diversification.

For Tiruppur and India’s wider textile ecosystem, the path forward requires simultaneous action on two fronts: diplomatic engagement to ease tariff burdens and deep structural reforms to upgrade production capabilities, broaden export destinations, and modernize factory operations.

Without such transformation, India’s most important textile hub will remain dangerously exposed to the next geopolitical wave one that could be even harder to withstand.

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Justin

Political

Economic

After being elected in a landslide last year, Britain's Labour Party government delivered a budget it billed as a one-off dose of tax hikes to fix the public finances, get debt down, ease the cost of living and spur economic growth.

A year on, inflation remains stubbornly high, government borrowing is up and the economy is turgid. The annual budget, due on Wednesday, is expected to bring more tax hikes in pursuit of the same elusive economic boom.

Rain Newton-Smith, head of business group the Confederation of British Industry, said Monday that "it feels less like we're on the move, and more like we're stuck in 'Groundhog Day.'"

It's not just businesses who are concerned. Alarmed by the government's consistently dire poll ratings, some Labour lawmakers are mulling the once-unthinkable idea of ousting Prime Minister Keir Starmer, who led them to victory less than 18 months ago.

Luke Tryl, director of pollster More in Common, said voters "don't understand why there has not been positive change.

"This could be a last-chance saloon moment for the government."

Not much room for maneuver

The government says Treasury chief Rachel Reeves will make "tough but right decisions" in her budget to ease the cost of living, safeguard public services and keep debt under control.

She has limited room for maneuver. Britain's economy, the world's sixth-largest, has underperformed its long-run average since the global financial crisis of 2008-2009, and the center-left Labour Party government elected in July 2024 has struggled to deliver promised economic growth.

Like other Western economies, Britain's public finances have been squeezed by the costs of the COVID-19 pandemic, the Russia-Ukraine war and U.S. President Donald Trump's global tariffs. The U.K. bears the extra burden of Brexit, which has knocked billions off the economy since the country left the European Union in 2020.

The government currently spends more than 100 billion pounds ($130 billion) a year servicing the U.K.'s national debt, which stands at around 95% of annual national income.

Adding to pressure is the fact that Labour governments historically have had to work harder than Conservative administrations to convince businesses and the financial markets that they are economically sound.

Reeves is mindful of how financial markets can react when the government's numbers don't add up. The short-lived premiership of Liz Truss ended in October 2022 after her package of unfunded tax cuts roiled financial markets, drove down the value of the pound and sent borrowing costs soaring.

Luke Hickmore, an investment director at Aberdeen Investments, said the bond market is the "ultimate reality check" for budget policy.

"If investors lose faith, the cost of borrowing rises sharply, and political leaders have little choice but to change course," he said.

Mixed pre-budget signals

The government has ruled out public spending cuts of the kind seen during 14 years of Conservative government, and its attempts to cut Britain's huge welfare bill have been stymied by Labour lawmakers.

That leaves tax increases as the government's main revenue-raising option.

"We're very much not in the position that Rachel Reeves hoped to be in," said Jill Rutter, a senior fellow at the Institute for Government think tank.

Instead of an economy that has "sparked into life," enabling higher spending and lower taxes, Rutter said Reeves must decide whether "to fill a big fiscal black hole with tax increases or spending cuts."

The budget comes after weeks of messy mixed messaging that saw Reeves signal she would raise income taxes – breaking a key election promise – before hastily reversing course.

In a speech on Nov. 4, Reeves laid the groundwork for income tax hikes by arguing that the economy is sicker and the global outlook worse than the government knew when it took office.

After an outcry among Labour lawmakers, and a better-than-expected update on the public finances, the government signaled it preferred a smorgasbord of smaller revenue-raising measures such as a "mansion tax" on expensive homes and a pay-per-mile tax for electric vehicle drivers.

The government will try to ease the sting with sweeteners including an above-inflation boost to pension payments for millions of retirees and a freeze on train fares.

Critics say more taxes on employees and businesses, following tax hikes on businesses in last year's budget, will push the economy further into a low-growth doom loop.

Patrick Diamond, professor in public policy at Queen Mary University of London, said satisfying both markets and voters is difficult.

"You can give markets confidence, but that probably means raising taxes, which is very unpopular with voters," he said. "On the other hand, you can give voters confidence by trying to minimize the impact of tax rises, but that makes markets nervous because they feel that the government doesn't have a clear fiscal plan."

High stakes for Reeves and Starmer

The budget comes as Starmer is facing mounting concern from Labour lawmakers over his dire poll ratings. Opinion polls consistently put Labour well behind the hard-right Reform UK party led by Nigel Farage.

The prime minister's office sparked a flurry of speculation earlier this month by preemptively telling news outlets that Starmer would fight any challenge to his leadership. What looked like an attempt to strengthen Starmer's authority backfired. The reports set off jitters verging on panic among Labour lawmakers, who fear the party is heading for a big defeat at the next election.

That election does not have to be held until 2029, and the government continues to hope that its economic measures will spur higher growth and ease financial pressures.

But analysts say a misfiring budget could be another nail in the coffin of Starmer's government.

"Both Starmer and Reeves are really unpopular," Rutter said. "They may be hanging on for now, but I don't think people will be giving you great odds that they'll necessarily last the course of the Parliament," which runs until the next election.

Source: Yahoo Finance

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Winkelmann

Economic

New car sales in Europe rose 4.9% in October as electric cars outpaced petrol and diesel registrations, European Automobile Manufacturers' Association data showed on Tuesday.

WHY IT'S IMPORTANT

The European car industry has taken a series of hits this year including U.S. President Donald Trump's trade tariffs, a slowdown in the Chinese market, and a slower-than-expected transition to electric vehicles.

Recently, concerns about a potential chip supply chain crisis surrounding Dutch chipmaker Nexperia had also added fuel to the fire.

Meanwhile, Chinese electric car exports to Europe are increasing.

BY THE NUMBERS

Sales in the European Union, Britain and the European Free Trade Association rose to 1.092 million cars in October as its largest markets including Germany and Britain added more new cars than last year, ACEA data showed.

Registrations at Volkswagen, Stellantis and Renault rose year-on-year by 6.5%, 4.6% and 10.6%, respectively. Despite Stellantis' registrations being down 4.7% year-to-date compared to the same period in 2024.

Tesla's sales meanwhile dropped 48.5% from a year ago as BYD's sales jumped 206.8%, now holding 1.6% of the market share from 0.5% in October 2024. Registrations of Chinese-owned SAIC Motor also jumped 35.9% from last year.

Total EU car sales rose 5.8%. Registrations of battery electric, plug-in hybrid and hybrid electric cars were up 38.6%, 43.2% and 9.4%, respectively, to account collectively for about 63.9% of the bloc's registrations, up from 55.4% in October 2024.

All major markets saw drops in their petrol and diesel

Overall sales rose 7.8% in Germany, 0.5% in the UK, 15.9% in Spain, 2.9% in France and fell 0.5% in Italy.

QUOTE

European Car Sales Rise 4.9% In October, ACEA Says_1

"Despite this recent positive momentum, overall volumes remain far below pre-pandemic levels," ACEA said.

"The battery-electric car market share reached 16.4% year to date, yet it is still below the pace needed at this stage of the transition," it added.

Source: Investing

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Gerik

Forex

Economic

A Currency Defying Headwinds

In 2025, the renminbi has posted a nearly 3% annual gain against the U.S. dollar, a notable contrast to its 5% depreciation in 2018 during the height of U.S.–China trade tensions. What makes this performance remarkable is the backdrop: China is contending with weak domestic consumption, record-low interest rates, a $281 billion capital account deficit over the first 10 months, and ongoing trade pressures from the U.S.

Yet, despite these negative fundamentals, the renminbi has appreciated steadily. This divergence between economic headwinds and currency strength signals a key causal force tight state management of the exchange rate by the People’s Bank of China (PBoC). Through persistently setting the daily midpoint reference rate above market expectations and deploying state-owned banks to buy USD in both onshore and offshore markets, Beijing has maintained orderly appreciation while avoiding volatility.

A Renewed Push for Currency Internationalization

The controlled strengthening of the renminbi suggests a renewed policy priority: positioning the currency as a regional and global store of value. Analysts from Pantheon Macroeconomics and Societe Generale point to similarities with China’s behavior during the 1998 Asian Financial Crisis, when it resisted competitive devaluation to build credibility.

This time, the policy intent is clearer. The 15th Five-Year Plan, released in October 2025, omits previously cautious language like "prudently promote" yuan internationalization. Goldman Sachs interprets this shift as a signal that currency internationalization is now a central policy goal, supported by Beijing’s tolerance for moderate, steady CNY appreciation.

Interest Rate Asymmetry and the Reference Rate Strategy

The current PBoC benchmark rate remains significantly below that of the U.S. Federal Reserve, reflecting China’s need to support weak domestic growth. However, the renminbi’s rise is not being driven by interest differentials traditionally a key determinant of FX flows but by aggressive use of the central bank’s reference rate.

Since November 2024, the average spread between PBoC’s daily fix and market expectations has been 327 basis points an unusually high gap that highlights China’s proactive control. This divergence is not accidental; it creates a one-sided expectation that the yuan will not weaken drastically, which deters speculative short-selling and supports confidence in the currency.

Foreign Exchange Activity and Capital Controls

Another structural pillar supporting the renminbi’s stability is the role of state-owned banks. Their regular participation in the market, including discreet sales of yuan and purchases of dollars, has kept the three-month volatility of CNY/USD at near decade-lows. This engineered calm has incentivized exporters to gradually unwind their holdings of over $1 trillion stored in domestic banks creating real USD supply and reinforcing CNY strength.

That said, the renminbi’s strength is not uniform. It has lost 7.7% against the euro and 3% against a trade-weighted currency basket this year, indicating that the appreciation is concentrated primarily in the USD pair. Moreover, without meaningful relaxation of China’s strict capital controls, large-scale global usage of the renminbi remains structurally constrained.

Growing Usage in Global FX Markets

According to the latest BIS survey, daily trading volume in the CNY–USD pair surged nearly 60% to $781 billion compared to 2022. The renminbi now accounts for over 8% of global FX turnover, suggesting growing interest from global participants especially central banks and institutional investors despite the limits of convertibility.

This is likely part of a long-term strategy. By anchoring the renminbi’s value and demonstrating stability amid global financial turbulence, China is nurturing its credibility as a reserve and trade settlement currency. This is particularly relevant in light of de-dollarization efforts among emerging economies and geopolitical shifts that encourage diversification in global payment systems.

A Political Currency with Global Aspirations

China’s recent handling of the renminbi is not simply a reaction to short-term economic conditions it is a calculated signal of its broader ambitions. The combination of disciplined exchange rate management, state-supported interventions, and long-term reform commitments suggest that Beijing is actively reengineering the renminbi’s role in the global financial system.

While structural limits like capital flow restrictions remain in place, China is taking incremental but deliberate steps to elevate the renminbi as a trusted regional and global asset. The steady pace of CNY appreciation, underpinned by trade competitiveness and historical credibility, could prove to be Beijing’s most effective instrument of soft power in an increasingly multipolar financial world.

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