A notable shift in global finance is underway as the Chinese yuan continues to gain traction as a currency for international settlements, according to Reuters. Kazakhstan has emerged as an active participant in this trend, gradually replacing dollar-denominated liabilities with borrowing in yuan as part of its efforts to strengthen economic stability.
Record-high offshore placements
In September, the Development Bank of Kazakhstan (DBK) raised 2 billion yuan on Hong Kong’s offshore market through a dim sum bond issuance. The deal marked a significant milestone for the country’s financial sector, positioning Kazakhstan — alongside Indonesia — among leading emerging economies using the yuan to diversify public debt.
Economic benefits and interest-rate differences
Differences in borrowing costs have primarily driven the shift. Lower interest rates in China have made yuan-denominated financing more attractive than U.S. dollar borrowing, particularly amid tighter U.S. monetary policy.
In addition, servicing yuan-denominated debt has been cheaper this year than servicing dollar-based obligations, allowing the state-owned enterprises to reduce financing expenses and lower hedging costs related to currency risk.
Currency transition
Legal experts at Linklaters say Kazakhstan’s increased use of the yuan reflects practical considerations rather than speculative motives. Deeper economic integration with China and the expansion of joint infrastructure projects have increased the need for yuan liquidity.
Funds raised in the debt markets are frequently reinvested in projects linked to the Belt and Road Initiative, creating a financing cycle that supports non-dollar transactions. As a result, Kazakhstan is steadily expanding its presence in alternative currency systems to reduce exposure to external market volatility.
