China has been actively seeking to internationalise its currency, the renminbi (RMB), for several years, with efforts acquiring greater urgency recently. According to reports from Business Standard, in February 2024, the Chinese party journal Qiushi published remarks by President Xi Jinping calling for the RMB to become a 'global currency' that is 'widely used in international trade, investment and foreign exchange markets and holds global reserve currency status'. This strategic positioning comes as the unpredictability of US economic policies, mounting national debt, and the softening market for US Treasuries drive global search for less risky alternatives. The US dollar has officially served as the world's primary reserve currency since 1944, overtaking the British pound's position in the Bretton Woods Agreement, but faces mounting challenges from fiscal pressures.
China's RMB integration has shown significant progress in cross-border trade settlement. As reported by Business Standard, RMB use in cross-border trade settlement now accounts for about 35%, compared to just 10% in 2017. China and Russia now settle 90% of their $245 billion trade in their national currencies, while China and Brazil settle 41% of their trade in RMB. The RMB's presence in global foreign exchange reserves has also grown substantially, reaching 2.3% of global reserves in 2025, up from virtually zero in 2015, despite not being a convertible currency like the US dollar, euro, and British pound. According to recent research published in the Journal of Financial Economics, the US dollar had an index value of 66.6 in 2024, while the next most used currency, the euro, had a value of 23.8.
China has significantly expanded its presence in international debt markets through dim-sum bonds worth $179 billion and panda bonds totaling $55 billion. According to Business Standard, the outstanding volume of dim-sum bonds can now be listed and traded in London and Luxembourg, while the total outstanding volume of panda bonds shows strong growth. China maintains a large and growing inter-bank bond market worth $21 trillion, second only to the US market of $58 trillion, which is now open to international investors with modest off-take at $430 billion. The Hong Kong-Mainland Bond Connect reached a peak of $180 billion in monthly turnover in March 2026. Global demand for dollars in turn creates demand for US sovereign debt, with a 2024 National Bureau of Economic Research paper positing that the reserve currency status increases the debt the US government can accumulate by 22 percent.
China has developed the China International Payment System (CIPS), which handled 8.2 million transactions worth $25 trillion in 2024-25. As reported by Business Standard, CIPS has witnessed rapid progress with 193 direct participants and 1,514 indirect participants, comprising 4,900 banking institutions in 189 countries. The Iran war and US sanctions have led to a major spike in CIPS usage, with average daily transaction value reaching $135.7 billion in March. The system works seamlessly with SWIFT and has been accelerated by the weaponisation of the dollar, particularly the freezing of nearly $300 billion of Russian assets since the Ukraine invasion in 2022. While the US dollar maintains its reserve status, there are signs that this position may be eroding due to political gridlock and deteriorating fiscal outlook.
China is pioneering Central Bank Digital Currency (CBDC) through the mBridge project, which allows central banks of participating countries virtual instant and direct cross-border currency settlements. According to Business Standard, the central banks of China, UAE, Thailand, South Africa and Hong Kong Monetary Authority currently participate, with current transaction volume of $55 billion. The Shanghai International Energy Exchange offers RMB-denominated oil futures through the petro-yuan market, with the Shanghai oil index ranked third globally after Brent and West Texas Index. Oil trade settled in RMB remains low at about 5% but is steadily rising in volume. The US dollar's reserve status provides two critical benefits to the US fiscal condition: lower borrowing costs and higher borrowing capacity, with one prominent economist estimating that the reserve currency status decreases interest rates by 10 to 30 basis points.
