- The Chinese yuan’s profile in global payments and trade is rising, overtaking the US dollar as the most used currency in cross-border payments in China.
- It’s also making a mark in other countries and was the most traded currency on Russia’s Moscow Exchange last year.
The US dollar has dominated global commerce for decades, and today, it accounts for around 60% of all global currency reserves. However, the tide could be slowly turning as more countries recognize the power that a currency wields and seek to prop up their own.
One of the leading contenders is China’s yuan, officially known as the renminbi. While China is the world’s second-largest economy and the nexus of global manufacturing, its currency has failed to keep up with the country’s ascent since the turn of the millennium.
The yuan has failed to rival the USD and has even fallen behind the euro, sterling pound, and the Japanese yen.
However, global political realignments are changing the currency landscape. China is now closer than ever to Russia and has even courted other major economies as members of BRICS, including Brazil, India, the UAE, Egypt, and South Africa. These nations are collectively against the USD’s domination and have been working on a blockchain-based alternative, as we have reported. This solution could take a bit longer, as some of the BRICS leaders have admitted, and in the meantime, China’s yuan looks like the de facto currency of choice.
The Yuan Gains Ground—Is Crypto Next?
Last year, the yuan overtook the USD in cross-border commerce for the first time ever in China, accounting for 48%, while the dollar hit 46.7%. This was seen as a significant event that ushered in a new era of de-dollarisation for Asia’s largest economy.
It doesn’t end there. By the end of 2023, the yuan emerged as the most traded currency on the Moscow Exchange. It accounted for 42% of the trades, edging the dollar’s 39.5%, as reported by Reuters and other local Russian outlets. Yuan volume tripled to 34.15 trillion rubles ($385 billion), while that of the USD dipped.
This trend is bound to only get stronger. For one, Russia, China, Iran and several Middle-Eastern nations that are warming to BRICS are subject to sanctions from the US and its allies in Europe and Asia. Russia, in particular, is now the most sanctioned nation in history. This has denied its banks and payment systems access to the global payments grid.
Russia has been experimenting with crypto as a go-around, as we reported. However, in cross-border trading with allies like China, the yuan and ruble are more suited.
The USD isn’t going to be threatened overnight. America is still the world’s largest economy, and the country enjoys the support of Europe and some of Asia’s largest economies, including Japan and South Korea.
However, de-dollarisation is certainly on course. And once the greenback is out of the picture, the yuan could become one of the key players. Gradually, crypto could also play a much more significant role, especially if China changes its stance against crypto, as has been reported.
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