Introduction
China’s ambition to elevate the renminbi (RMB) to a globally dominant currency is reshaping international finance and geopolitics. This strategic endeavour aims to challenge the US dollar’s supremacy, reduce China’s vulnerability to Western financial systems, and bolster its geopolitical influence. Despite notable progress, the RMB’s journey toward full internationalisation faces significant structural and political hurdles.
The Renminbi’s Global Ambitions
China’s pursuit of RMB internationalisation is a calculated strategy aimed at reducing reliance on the US dollar and enhancing its influence in global financial markets. Since the late 2000s, China has initiated several measures to promote the RMB’s global use, including the establishment of offshore RMB markets, currency swap agreements, and the development of the Cross-Border Interbank Payment System (CIPS) as an alternative to the SWIFT network.
Recent developments underscore China’s intensified efforts. In March 2025, cross-border RMB payments reached a record high, and the People’s Bank of China expanded its currency swap agreements to over 30 countries. Additionally, China’s digital yuan is gaining traction in cross-border transactions, further solidifying the RMB’s international presence.
China is making strides in settling energy trades in RMB. Notably, in late March 2025, a yuan-settled LNG trade was executed between China’s CNOOC and France’s TotalEnergies through the Shanghai Petroleum and Natural Gas Exchange. Such transactions underscore China’s efforts to promote the RMB in global commodity markets. The development and deployment of the digital yuan (e-CNY) represent a significant step toward RMB internationalisation. By leveraging blockchain technology and digital payment systems, China aims to facilitate cross-border transactions and enhance the RMB’s global usability.
Trump’s Tariff Policies and the Dollar’s Decline
The protectionist trade policies and ‘America First’ adopted by Trump have profound implications for the US dollar’s global standing. By imposing tariffs and engaging in trade wars, particularly with China, the US introduced volatility and uncertainty into global markets. These actions eroded international trust in the dollar’s stability, prompting countries to seek alternatives.
Economist Kenneth Rogoff highlighted that Trump’s aggressive economic policies accelerated the dollar’s decline, likening the current instability to the Nixon-era shock of the 1970s. Despite the absence of a clear alternative, the cumulative effect of these policies has been a gradual shift toward a more multipolar currency system.
Unilateral declaration of ‘Liberation Day’ tariffs on April 2, 2025, by Trump escalated the global tariff war, especially between the US and China, reaching up to 145% on US imports from China and 125% on Chinese imports from the US, effectively disrupting bilateral trade flows, prompting China to seek alternative avenues to stabilise its economy and reduce reliance on the US dollar. This environment created a strategic impetus for China to advance the RMB’s international use.
De-dollarisation and Financial Sovereignty
The establishment of the CIPS serves as an alternative to the SWIFT network, facilitating RMB-denominated transactions globally. In 2023, CIPS processed RMB 123.06 trillion (approximately $17.09 trillion), marking a 27.27% year-on-year increase.
The global trend of de-dollarisation is gaining momentum, with countries actively seeking to reduce their dependence on the US dollar. China is at the forefront of this movement, promoting the RMB in international trade and finance. Notably, China has engaged in currency swap agreements with numerous countries, including Russia, Pakistan, and Argentina, facilitating trade in local currencies. Moreover, foreign companies are increasingly issuing ‘panda bonds,’ RMB-denominated debt instruments in China’s domestic market, to hedge against currency risks and tap into China’s investor base. In 2024, panda bond issuance reached a record RMB194.8 billion ($26.5 billion), with RMB41.6 billion issued in the first quarter of 2025 alone. This trend signifies growing confidence in the RMB and China’s financial markets.
Geopolitical Implications
China’s efforts to internationalise the RMB are perceived as a direct challenge to the US dollar’s dominance. By promoting RMB usage in global trade and finance, China aims to create a multipolar currency system, reducing the dollar’s influence and enhancing its economic sovereignty. This shift has significant implications for global financial stability and the balance of power.
The increased use of RMB in Asia, Africa, and Latin America enhances China’s regional influence. Countries engaging in RMB-denominated trade and investment may become more economically aligned with China, potentially leading to shifts in geopolitical alliances and dependencies. China’s development of alternative financial infrastructures, such as CIPS and the proposed Asian securities depository in Hong Kong, aims to reduce reliance on Western-dominated systems like SWIFT and Euroclear. These initiatives reflect China’s strategic intent to insulate itself from potential financial sanctions and enhance its autonomy in global finance.
The BRI, encompassing over 140 countries, serves as a conduit for promoting RMB usage in international trade and investment. In 2021, RMB settlements with BRI participants reached RMB 5.42 trillion ($763.4 billion), reflecting a 19.6% increase from the previous year. By financing infrastructure projects and facilitating trade in RMB, China strengthens its economic ties and extends its geopolitical reach.
China has expanded its network of bilateral currency swap agreements to 41 countries, providing a potential RMB liquidity pool of RMB 3.5 trillion (around $554 billion). These agreements enable partner countries to settle trade and investment transactions in RMB, reducing dependence on the dollar and enhancing China’s financial influence in the world.
Challenges to RMB Internationalisation
Despite significant progress, the RMB faces challenges in achieving full internationalisation. China’s stringent capital controls and the RMB’s limited convertibility hinder its acceptance as a global reserve currency. Foreign investors often face restrictions in accessing Chinese financial markets, limiting the RMB’s attractiveness for international use. Furthermore, while the RMB’s share in global payments has increased, it still lags behind the US dollar and the euro. As of early 2025, the RMB accounted for approximately 4% of global payments, compared to the dollar’s 57%.
The RMB’s exchange rate volatility poses risks for international investors and trade partners. For instance, in early 2025, the RMB fell past RMB7.33 to the dollar, its lowest since 2023, prompting the People’s Bank of China to sell RMB60 billion ($8.2 billion) of offshore bills to stabilise the currency. Such fluctuations can deter foreign entities from adopting the RMB for transactions. China’s financial markets lack the depth and liquidity of established global financial centres. The limited availability of RMB-denominated financial instruments and the underdevelopment of China’s bond and equity markets constrain the RMB’s international appeal.
The Path Toward a Multipolar Currency System
The combined effect of China’s proactive policies and the US’s protectionist stance is steering the world toward a multipolar currency system. Countries are diversifying their foreign exchange reserves and exploring alternative currencies for trade settlements. This shift reduces the dollar’s hegemony and introduces a more balanced global financial architecture.
Conclusion
China’s pursuit of RMB internationalisation is a multifaceted strategy encompassing economic, financial, and geopolitical dimensions. While significant progress has been made, challenges such as capital controls, exchange rate volatility, and limited market depth persist. Nevertheless, China’s continued efforts to promote the RMB through initiatives like the BRI, expansion of financial infrastructure, and technological innovations suggest a sustained commitment to elevating the RMB’s global stature. The success of this endeavour will depend on China’s ability to implement necessary financial reforms and navigate the complex dynamics of international finance and geopolitics.
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