- China wants the yuan to play a bigger global role but hasn’t called for it to replace the dollar.
- Xi Jinping said China was committed to internationalizing the yuan “in an orderly manner.”
- State media is touting the yuan, but one expert offered a “rational view” on de-dollarization.
Numerous headlines have flashed a warning in recent days that China is pushing for its currency to replace the US dollar as the world’s reserve currency of choice.
“The US dollar conquered the world. Is it at risk of losing its top spot?” NPR asked in June, as it pitted China as a top contender against the greenback.
“Move over, US dollar. China wants to make the yuan the global currency,” The Washington Post reported in May.
The Stanford historian Niall Ferguson told CNBC in May that the yuan isn’t likely to replace the dollar in the next two decades. But the euro, too, hasn’t been able to do this in the more than 20 years since it went into circulation.
The yuan-versus-dollar narrative is often part of a broader call for de-dollarization — primarily from emerging nations, some of whom are sanctioned — though the euro is still the world’s second most-commonly held currency after the dollar, the European Central Bank reported. Meanwhile, the Chinese currency is in fourth place, after the Japanese yen.
While it’s fair to say China might not be happy with the dominance of the US — whether in global politics, culture, or the financial system — Beijing is far from openly advocating for the “redback,” another name for the yuan, to immediately replace the greenback.
Here’s what China’s said about de-dollarization and the rise of the yuan in recent months.
China’s leader, Xi Jinping, has touted yuan internationalization but has not mentioned dominance
At the Chinese Communist Party’s congress, which it holds once every five years, in October 2022, China’s leader, Xi Jinping, touted his vision of what analysts call “Fortress China” to be economically independent and insulate the country from external shocks. This push accelerated after other nations hit Russia with sweeping sanctions.
“Mechanisms for countering foreign sanctions, interference, and long-arm jurisdiction will be strengthened,” a report the Chinese leader delivered to the congress said.
“This was an explicit call to boost the PRC’s sanctions-busting mechanisms,” Rory Green, the chief economist for China at the London-based macroeconomic-forecasting consultancy TS Lombard, wrote in an April note seen by Insider, titled “Death of the Dollar?”
In April this year, Xi again raised China’s goal of yuan internationalization in Qiushi magazine, a Chinese Communist Party journal.
In Qiushi, Xi said that China was committed to promoting yuan internationalization “in an orderly manner.”
It isn’t the first time Beijing has said it wants the yuan to go global — the grand ambition has been around since the 2000s.
But, while China wants the yuan to play a more prominent international role, the nation doesn’t necessarily want the yuan to be the world’s dominant reserve currency — China isn’t even ready for a complete break from the dollar, Green told Insider in May. Key challenges for China include Beijing’s unwillingness to open its capital accounts or run a deficit.
Two China-focused analysts Insider spoke to said they had not seen Beijing explicitly calling for the yuan to replace the dollar as the dominant reserve currency, with the language calling for a push in “internationalization” and “facilitating usage” instead.
State media has touted the rise of the yuan, with more intense coverage recently
While Xi and his administration have been nuanced in communicating their vision for the yuan, China’s state media has been blunter with its messaging. These outlets have championed the rise of the currency while expounding the ills of a dollar-dominated global-trading and financial system in the last few months.
But just as Xi instructed, the media outlets have promoted a “steady and prudent” approach to broadening the international use of the yuan. A report from the Xinhua state news agency on July 1 discussed the Central Bank of Argentina’s plan to include the yuan in the country’s deposit and withdrawal currencies.
Media outlets are also closely tracking the yuan’s internationalization, with the Chinese Communist Party’s flagship publication, People’s Daily, devoting one full page to the development on May 30.
On June 25, The Chinese Communist Party-linked Global Times even trumpeted a 0.25% rise in the share of yuan transactions on the SWIFT financial-messaging system when the use of the Chinese currency rose to 2.54% from 2.29% in April. For what it’s worth, the US dollar and the euro account for a 43% and a 32% share of the payment, respectively, SWIFT reported.
But at least one analyst has called for a rational view on de-dollarization
Despite the aggressive posturing in mainstream media, there are calls for cooler heads and more nuance.
In April, the Securities Times, a leading national financial-news outlet, offered a “rational view” on de-dollarization and urged against the movement as an “absolute struggle against hegemony,” a commentary by Liqing Zhang, the director of international-finance studies at the Central University of Finance and Economics in Beijing, said.
In his commentary, Zhang listed the current Fed’s monetary tightening — rather than geopolitics — as a key reason for de-dollarization.
“Local currency settlement does not necessarily weaken the US dollar’s status as a global reserve and pricing currency, nor does it necessarily lead to the end of ‘dollar hegemony,'” Zhang added.
After all, “there is still room for improvement in the freely convertible currencies of many developing countries,” Zhang added, without naming any of these countries.
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