Title: China's Push to Make the Yuan a Global Player: Dethroning the Dollar?
Global Yuan Advancement Amid U.S. Dollar Retreat: China's Strategy Unveiled
In the face of escalating US tariffs, Chinese President Xi Jinping's recent tour of Southeast Asia was more than just a diplomatic mission—it was a strategic opportunity to push the yuan further into the global spotlight. The People's Bank of China (PBOC), sensing a moment of chaos in global trade, ramped up efforts to increase the yuan's usage.
Cross-border yuan payments reached a record high in March, sparking renewed interest in a global yuan. Analysts suggest this surge is of paramount importance as protectionist US tariffs undermine faith in the US Dollar and other US assets[1]. In response to this instability, the PBOC-controlled financial services firm, China UnionPay, bolstered its payment network in Vietnam and Cambodia, promoting QR-code payments that could help ease the reliance on the Dollar[2].
These moves mark one end of a broader push to expand the yuan's role as an international currency. At the other end, the PBOC has been engaging in offshore yuan currency swaps with other central banks, reaching a record 4.3 trillion yuan ($591.2 billion) in February[3]. Moreover, initiatives such as cross-border commodity trades settling in digital yuan and attempts to price commodities like oil and gold in the Chinese currency continue to gather momentum.
Behind these actions is a clear desire for a financial architecture independent of Western influence, particularly US banks[4], - a concern that becomes more pressing as US President Donald Trump drives a wedge between trading partners and creates a scramble to reroute trade.
E Yongjian, vice-general manager of Bank of Communications' research department, stated at a seminar on yuan internationalisation that "The US weaponising tariffs has cast doubt over US asset safety, undercut trust in the Dollar, and shaken the greenback’s global status"[4].
As China strives to make the yuan a global player, it is employing several key strategies. These include promoting the use of cross-border settlement mechanisms and offshore clearing banks to facilitate RMB-based transactions[1]. Additionally, strategic agreements with trading partners and widespread recognition of the yuan in global trade infrastructures are critical to its success[1][2].
At the same time, China's efforts to de-dollarize are not without challenges, such as the sheer size of its US debt holdings and the continued influence of the Dollar in global finance[1]. Nevertheless, China's strategic moves, especially in the context of de-dollarization gaining traction, are gaining momentum.
- The escalating US tariffs have provided a strategic opportunity for China to strengthen the use of the yuan in global finance, specifically as cross-border yuan payments reached a record high.
- To facilitate RMB-based transactions, China is promoting the use of cross-border settlement mechanisms and offshore clearing banks, such as China UnionPay bolstering its payment network in Vietnam and Cambodia.
- To ascend as a global player, China's efforts in the internationalization of the yuan also include entering into strategic agreements with trading partners and ensuring widespread recognition of the yuan in global trade infrastructures.
- As China aims to make the yuan a dominant player in global markets, it faces challenges like the size of its US debt holdings and the continued influence of the Dollar in global finance, but its strategic moves are gaining momentum with the growing trend of de-dollarization.
