Xi Jinping has clearly emphasized the goal of elevating the Chinese renminbi (RMB) to global reserve currency status, offering the most definitive expression yet of China’s ambition to expand its currency’s international influence.
The renewed discourse strengthens China’s strategy for de-dollarisation; however, the immediate effect on the market is minimal since capital controls and a cautious policy approach keep the demand for yuan reserves in check.
This directive, published in the Communist Party’s ideology journal Qiushi and originating from a 2024 speech, outlines the need to build a “powerful currency” widely used in international trade, investment, and foreign exchange markets.
To support this ambitious goal, Xi Jinping detailed several critical foundations:
- Robust Financial Infrastructure: The establishment of a “powerful central bank” for effective monetary management.
- Competitive Institutions: The development of globally competitive financial institutions.
- Influential Financial Hubs: The creation of international financial centers capable of attracting global capital and exerting influence over global pricing.
The timing of these comments reflects a strategic response to global economic shifts and uncertainties:
- Global Market Dynamics: The call comes amidst a weaker US dollar, changes in Federal Reserve leadership, and rising geopolitical and trade tensions, prompting central banks worldwide to reconsider their exposure to dollar assets.
- Shifting Global Order: Analysts note China’s perception of a changing global order, with the RMB positioned as a “strategic counterweight” to limit US leverage in an increasingly fractured financial system.
Despite China’s ambitions, the renminbi’s current international standing reveals significant challenges:
- Trade Finance Role: The RMB has become the world’s second-largest currency in trade finance since 2022.
- Limited Reserve Status: However, its role in official global reserves remains limited, accounting for only 1.93% as of Q3 2025, placing it sixth behind the US dollar (57%) and the euro (approximately 20%).
- Key Obstacles for Greater Adoption: Analysts identify an open capital account and full convertibility as crucial for increasing global investor and central bank holdings of RMB.
- Calls for Appreciation: International trading partners and the IMF have urged Beijing to allow the RMB to appreciate more sharply, arguing it is undervalued, contributes to China’s large trade surplus, and has recently experienced real exchange rate depreciation due to deflation. Chinese policymakers, while stating no intention to use a weaker RMB for trade advantage, have shown tolerance for mild appreciation against a weaker US dollar, though it has depreciated against the euro.
Beijing has intensified efforts on several fronts to bolster its influence in global finance and trade. One significant development is the expansion of the Cross-Border Interbank Payment System (CIPS), which serves as a parallel settlement mechanism to the established SWIFT network. This move is particularly evident in transactions involving Russia, especially in the context of heightened geopolitical tensions and economic sanctions. By facilitating transactions in yuan instead of the US dollar, China aims to create a more resilient financial framework that can withstand external pressures.
In the realm of energy trade, the collaboration between China and Russia has grown stronger, with an increasing number of transactions being settled in yuan. This shift not only enhances the bilateral momentum of the two economies but also shields their financial exchanges from the risks associated with international sanctions, which have affected both countries in various capacities.
Beyond its relationship with Russia, China has proactively signed currency swap agreements with approximately 50 countries. These agreements serve as liquidity backstops, enabling participating nations to engage in local-currency trade without relying on US dollars. This initiative is part of China’s broader strategy to promote financial cooperation and enhance the use of the yuan on the global stage, facilitating smoother trade relations and reducing dependency on Western financial systems.
As a result of these efforts, China is positioning itself as a key player in the global financial system, where it seeks to establish a more multipolar currency landscape that diminishes the dominance of the US dollar while fostering economic partnerships with a diverse array of countries.
Looking ahead, analysts believe that while Xi’s rhetoric won’t immediately transform global foreign exchange markets, it solidifies a long-term strategic tilt that investors are already observing. China’s focus on domestic growth and advances in emerging technology are expected to support longer-term appreciation for the renminbi, as Beijing continues to “nudge its currency forward” amid perceived weakening of the dollar’s global dominance.
