Yuan credits are rising in popularity among investors. As Beijing continues to promote the yuan globally, yuan lending is expected to surpass offshore dollar loans at Chinese banks due to favorable pricing.

China’s overseas bank loans tripled in four years to 2.52 trillion yuan, while onshore and offshore yuan debt sales are at record levels for the second year.

Cheap yuan rates support the surge, argue bankers. Even without capital account liberalization, the market is generating its own momentum and a growing appetite to own and spend yuan, indicating China’s ambition to globalize the currency is making progress.

“I think this phase is now really more driven by fundamental interest in renminbi funding,” said Deutsche Bank’s China onshore debt capital markets head Samuel Fischer.

“There’s more and more international investors who don’t look at this just as an arbitrage, but who really have renminbi allocation and there are some very big anchor orders from outside China,” said. “The dollar is at a critical juncture, and diversification is really happening.”

China has promoted the yuan as a currency for international trade and financing for years, and its proportion of global foreign exchange transaction has steadily risen from a low base to 8.5% in April, according to the Bank for International Settlements. The dollar accounts for 89% of turnover.

In the 11 months to November, non-Chinese issuers raised 169.7 billion yuan ($24.10 billion) in onshore markets and a record 801.9 billion in offshore markets, where demand was high.

The central bank reported that foreign currency lending, largely dollars, decreased to $375 billion at the end of November from $587 billion in 2022, while yuan lending rose to $357 billion.