Chinese President Xi Jinping renewed calls Saturday for the yuan to become a global reserve currency, aiming to reduce reliance on the U.S. dollar, though capital controls and cautious policy continue to limit near-term market impact.
China revives push to elevate yuan as Beijing intensifies its long-term effort to internationalize the currency, with Xi outlining the ambition in an article published in Qiushi, the Communist Party’s leading theoretical journal. The renewed rhetoric underscores China’s strategic goal of de-dollarization amid ongoing debate over the dollar’s global dominance.
Xi said China must build a “strong currency” that is widely used in international trade, investment and foreign exchange markets and that can ultimately achieve global reserve status. He did not mention the United States by name, but the message aligns with China’s broader push to reduce exposure to dollar-based financial systems.
Xi Signals Long-Term De-Dollarization Strategy
The call reinforces a policy direction China has pursued for more than a decade, particularly as geopolitical tensions and sanctions risks reshape global finance.As China revives push to elevate yuan as a major player on the world stage, officials have increasingly promoted it as a settlement currency in trade and energy transactions, especially with partners outside the Western financial orbit.
Nearly one-third of China’s foreign trade is now settled in yuan, according to official data, reflecting policy incentives and the desire of some trading partners to limit dollar exposure. The shift has been most visible in commerce with Russia, where energy trade is increasingly priced and settled in yuan.
“The goal is not speed but durability,” Xi wrote, adding that building a credible reserve currency requires institutional strength and market confidence over time.
Despite the emphasis, officials acknowledge that scale alone does not confer reserve-currency status. China has one of the world’s largest banking systems and foreign exchange reserves, but global investors continue to weigh transparency, legal safeguards and policy predictability.
Infrastructure Grows as Limits Persist
Beijing has expanded financial infrastructure to support wider yuan use. The Cross-Border Interbank Payment System, or CIPS, has grown as an alternative settlement network to SWIFT, particularly for transactions involving sanctioned jurisdictions.
China has also signed currency swap agreements with about 50 economies, providing liquidity backstops that facilitate trade and financial cooperation in local currencies. These arrangements allow central banks to access yuan funding during periods of stress.
Within the expanded BRICS group, China is promoting discussions on alternative payment systems and, over the longer term, a shared settlement mechanism. Officials frame these talks as diversification rather than a direct challenge to the dollar, though U.S. policymakers have warned against efforts they view as undermining the existing financial order.
Still, structural barriers remain significant. Capital controls limit the free movement of funds, and the yuan is not fully convertible. Exchange rate management by authorities further constrains its appeal as a reserve asset.
“Reserve currencies require openness and trust,” said a senior Asia-based currency strategist at a global bank, who noted that policy caution continues to cap demand from central banks.
Markets Temper Expectations for Yuan Adoption
From a market perspective, the renewed push is seen as incremental rather than transformative. Analysts widely view the yuan as undervalued on long-term metrics, and it has strengthened over the past year. However, authorities remain wary of rapid appreciation that could hurt exports or trigger destabilizing capital inflows, a caution that tempers enthusiasm as China revives push to elevate yuan.
Foreign holdings of Chinese bonds have stabilized but remain well below levels seen in major reserve-currency markets. Investors cite concerns over regulatory intervention and limited hedging tools.
“The direction is clear, but the timeline is long,” said an economist focused on emerging markets. “Internationalization will advance gradually, shaped as much by domestic reform as by geopolitics.”
Taken together, China’s strategy reflects persistence rather than urgency. While Xi’s renewed call highlights Beijing’s ambitions, the yuan’s path to reserve-currency status is likely to be measured, constrained by policy choices and the need to build global confidence.
Source:
