An escalating trade war between the world's two largest economies could persuade an increasing number of global investors to favor China's yuan over the U.S. dollar, the former People's Bank of China (PBOC) Governor Zhou Xiaochuan told CNBC Tuesday.
Trading in the partly managed yuan — also called the renminbi — has been volatile over recent months, amid threats of additional U.S. tariffs against China.
This comes after President Donald Trump said late last week that he was "ready to go" on tariffs targeting another $267 billion on Chinese goods "if he wants." That would follow planned charges on $200 billion of Chinese goods in several industries, including technology.
Beijing has vowed to retaliate if Washington takes any new steps on trade.
"If the U.S. uses too much financial sanctions against the other country, it drives (investors) to consider the other currency," the former People's Bank of China (PBOC) Governor Zhou Xiaochuan told CNBC's Geoff Cutmore on Tuesday.
"It is quite like the beginning of the global financial crisis, when the U.S. dollar had a little bit of a problem because it gave room for the other currencies to play a certain role," he added.