China leverages its trade edges to promote the yuan in bilateral deals, aiming to curb the dollar’s dominance in the global financial system. This approach operates as part of a broader strategy to diversify settlement currencies and deepen economic ties with trading partners around the world.
There is a clear push to settle more trade and investment in the yuan rather than the dollar. Observers say this is part of Beijing’s plan to lower reliance on dollar assets and reduce the leverage of Washington over its financial stability. The effort reflects a long-term objective to expand the role of the yuan in cross-border transactions and to support greater financial autonomy for China.
Beijing is also advancing the yuan as a preferred medium for crude oil settlements with major suppliers in the Middle East. This shift could alter traditional oil trading practices and challenge the dominance of petrodollars in the energy market, according to industry analysts.
In addition, there is growing interest in expanding commercial and financial activities in national currencies with members of the Association of Southeast Asian Nations (ASEAN). Agreements on settlements in local currencies have already been signed with several ASEAN partners, including Indonesia, Vietnam, and Cambodia, signaling a regional push toward currency diversification in trade.
The expansion is not without constraints. The yuan remains less convertible than the dollar or the euro, and China maintains strict controls on capital flows. Current indicators show the yuan’s share in global payments is modest, while its presence in foreign exchange markets and central bank reserves is comparatively limited. These factors influence how quickly the yuan can scale as a global settlement currency.
There are also notable shifts in the broader currency landscape as major economies explore alternatives to the dollar for some bilateral and regional transactions. The move toward more diversified currency use reflects debates about monetary sovereignty, financial resilience, and the potential for a multipolar financial system in the years ahead. While progress has been made, practical hurdles remain, including regulatory alignment, liquidity considerations, and the need for robust financial infrastructures to support wide-scale use of multiple currencies in trade and finance.
China and Brazil have shown interest in reducing dollar dependence for trade, signaling a broader trend toward currency diversification across regions. The evolving mix of settlement currencies continues to shape international finance, influencing how countries manage exchange rate risk, balance of payments, and monetary policy in a shifting global economy.