Explainer | Which 8 countries are using China’s yuan more, and what does it mean for the US dollar?
- China is ramping up efforts to boost the yuan’s appeal as an alternative currency in international trade and as a reserve currency in the face of US dollar hegemony
- From South America to the Middle East, nations are finding ways to sidestep the long-dominant American currency in lieu of China’s yuan
Beijing continues to send a clear message – as it has for years – that enhancing overseas use of its currency, the yuan, is a priority, particularly in the face of US dollar hegemony.
The push has involved attempts to boost the yuan’s appeal as an alternative in international trade and as a reserve currency.
As a result, China has seen a rising share of its currency used in trade finance, international payments, foreign exchange transactions and central bank reserve assets.
However, while not negligible, these advances remain quite small when compared with the ubiquity of the US dollar, which is used in around 90 per cent of foreign exchange transactions around the world, according to the Bank for International Settlements.
Nonetheless, a growing number of countries have been dumping their US Treasury bills, increasing their gold reserves and settling bilateral trade in local currencies.
In March, the yuan became the most widely used currency for cross-border transactions in China, overtaking the dollar for the first time. And the official data reflects the fruits of Beijing’s efforts.