The Chinese yuan is making significant strides in the global financial systems. This shift is part of a broader de-dollarization effort, where China is attempting to elevate its currency status globally.
In recent years, there has been a noticeable increase in the yuan’s usage, positioning itself as a strong contender against the US dollar in the international arena.
In April 2024, the Chinese yuan surpassed the Euro in terms of economic influence. Data from Bloomberg revealed a significant milestone for the yuan, as it accounted for 6% of the global payments. While it’s still far behind the US dollar, this progress highlights the yuan’s growing acceptance on the global stage.
The yuan witnessed a remarkable 13.37% increase in trade payments in June. This placed it right behind the dollar, demonstrating its growing prominence. However, it’s important to note that the dollar still dominates 88% of foreign currency transactions, overshadowing the yuan’s share, which remains below 7%.
The geopolitical landscape has been altered by US sanctions on Russia, which began in February 2022. These measures have inadvertently provided an opportunity for the Chinese yuan to gain traction. The yuan’s increasing momentum can be linked to its growing use in Russia, influenced by the restrictions placed on the dollar.
China has strategically used this situation to bolster its currency’s international standing. It has actively promoted the yuan, particularly in Russian markets where alternatives are limited due to sanctions. This strategy aligns with China’s broader de-dollarization goals, aiming to position the yuan as a viable alternative.
China seized the geopolitical tension to advance its de-dollarization agenda. By fostering yuan usage in Russia, China capitalized on limited currency choices available there. This strategic move not only strengthens China’s economic influence over Russia but also supports its aim of internationalising the yuan further.
According to Maia Nikoladze from the Atlantic Council’s GeoEconomics Center, ‘Trading in yuan is convenient for both Russia and China. Russia lacks alternative currencies, and China gains economic leverage, bolstering the yuan’s international status.’ These insights underline the dual benefits for both nations in adopting the yuan.
The path towards the yuan overtaking the dollar as the world’s dominant currency is fraught with challenges. However, the yuan is moving steadily, supported by strategic alliances like the BRICS nations. These efforts aim to undermine the dollar’s supremacy and could eventually alter the global financial equilibrium.
While significant progress is being made, experts suggest that dethroning the dollar will require time. However, China’s persistent efforts reflect a clear intention to enhance the yuan’s global stature, slowly chipping away at the dollar’s dominant position.
The global financial landscape is witnessing a gradual shift as the Chinese yuan gains momentum.
Despite the dollar’s enduring dominance, strategic moves by China indicate a future where the yuan plays a more significant role.
