China Takes Aim at Dollar’s Global Domination


A screen shows a live coverage of Chinese President Xi Jinping delivering a speech on March 13.

Photographer: Jade Gao/AFP/Getty Images

By Rebecca Choong Wilkins
May 4, 2023 

President Xi Jinping is supercharging efforts to rival the most powerful currency in the world.

China is pushing through deals linked to the yuan as it seeks to circumvent US attempts to weaponize the dollar. Agreements to transact some payments in the Chinese currency from Saudi Arabia, Brazil and even France have been signed in recent months.

Sanctions on Russia — an acute reminder of the greenback’s unique dominance in the global economy — have been a potent catalyst in expanding the use of an alternative.

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For Beijing, the aim is to carve out a much bigger chunk of the international economy that doesn’t need the dollar at all. In the long run, that makes China less vulnerable to efforts to alienate it through investment restrictions or sanctions.

It’s a welcome development for smaller nations — including at least a dozen in Asia — that are also experimenting with de-dollarization. Countries like Bangladesh and Laos have stepped up negotiations with China to boost their use of the yuan too.

The Yuan is Being Used Even More in Global Contexts

China's currency has been gaining share in global payments, trade

Source: Bloomberg, SWIFT

Note: Global payments data excludes transactions within euro zone

For now, King Dollar is far from being dethroned. Payments in the yuan still make up a tiny portion of global transactions and the currency is tightly controlled by Chinese authorities.

That limited role has made it relatively low stakes for other countries opting to use the yuan.

While there’s caution around becoming entangled in deteriorating China-US ties, so far there’s been little of that same sentiment when it comes to diving into this facet of their rivalry.

But momentum to increase the yuan’s reach underscores Beijing’s broader push to create an alternate global order that challenges the US.

And with Washington and the European Union increasingly viewing China as a strategic rival, it may no longer be so straightforward for other nations to separate the finance from the geopolitics.

 


Photographer: Steph Davidson/Bloomberg