China uses its trade advantages to promote currency in bilateral deals to challenge the dominance of the dollar in the international monetary system. It has been reported South China Morning Post.
“The desire to settle in the yuan rather than the dollar as a medium for trade and investment is one of the many ways the PRC plans to reduce its reliance on dollar assets and to prevent Washington from suffocating Beijing financially,” the article states.
The publication states that Beijing is also lobbying for the use of the yuan in bilateral crude oil trade with the Middle East. This is a “potential challenge for petrodollars,” according to the publication.
According to journalists, Beijing is also interested in expanding commercial and financial transactions in national currencies with the countries of the Association of Southeast Asian Nations (ASEAN). The publication clarifies that agreements on settlements in national currencies have already been signed with some ASEAN member states, for example Indonesia, Vietnam and Cambodia.
The newspaper also points out that the expansion of the Chinese currency is constrained by the fact that the yuan is less convertible than US and European currencies, and China has strict capital controls. To date, the yuan accounts for only 2.19% of world payments, 3.5% of world foreign exchange transactions, and 2.69% of central bank reserves.
China and Brazil before refused dollar to yuan for further trade.