President Xi’s Yuan Push vs. Dollar Dominance: Why Reserve Currency Status Is So Hard
For more than a decade, China’s top leadership has chased a strategic upgrade: not merely selling goods to the world, but rewriting the world’s financial plumbing so that the renminbi (yuan) is something other countries need—to trade, to borrow, to save, and to settle. Under Xi, that goal has sharpened into a geopolitics project: reduce China’s exposure to a dollar-centered system that can be “weaponized” through sanctions, payment chokepoints, and regulatory pressure, and build an ecosystem where the yuan plays a larger—and eventually reserve—role.
But if you’re asking whether the yuan is likely to replace the dollar as the world’s primary reserve currency anytime soon, the short answer is: not on current conditions. The long answer is more interesting: China is still making real, incremental gains in usage, even as the core requirements of a true reserve currency remain stacked in the dollar’s favor.
China doesn’t need the yuan to replace the dollar to score a strategic win. It just needs the world to use the yuan more often. Beijing can breathe easier in a system where the dollar doubles as money and leverage.
That’s the ambition behind Xi’s push: increase yuan settlement, widen access to China’s financial plumbing, and make the currency harder to sideline in global trade. But the same reality keeps colliding with the strategy: the dollar’s dominance is not merely political. It’s structural. Built into markets, contracts, and the crisis habits of the modern world.
The dollar’s moat: why the world parks its wealth in greenbacks
1) Bretton Woods set the architecture.
After World War II, the Bretton Woods system organized global finance around the dollar, with fixed exchange rates and (initially) dollar convertibility to gold. Even after that system collapsed in the early 1970s, the habit and the infrastructure stayed.
2) The U.S. built the deepest safe-asset market on earth.
Reserve managers don’t just want a currency; they want something they can hold in massive size without moving the price. The U.S. Treasury market is routinely described as the world’s largest securities market, with nearly $30 trillion in marketable debt outstanding (as of late 2025).
3) The dollar sits at the center of trade, debt, and FX.
A U.S. Congressional Research Service brief summarizes the dollar’s “system role” in plain numbers: about half of international trade is invoiced in dollars, about half of international loans and global debt securities are dollar-denominated, and dollars are involved in nearly 90% of foreign-exchange transactions.
4) Institutions, openness, and rule-of-law advantages matter.
The Federal Reserve describes the dollar’s position as rooted in U.S. economic scale, openness to trade and capital flows, and strong property rights/rule of law—conditions that support unmatched market depth and a large supply of safe dollar assets.
Put those together and you get the famous “exorbitant privilege”: the U.S. can borrow more cheaply, run deficits more easily, and export financial conditions to the world.
The geopolitical power the dollar gives Washington
Reserve-currency status is not only about prestige; it’s leverage.
Because so much trade and finance clears through dollar channels, the U.S. can project power through the payments system—from sanctions to pressure campaigns to compliance standards that ripple outward through global banks.
That doesn’t mean the U.S. controls every transaction. It means the dollar-based network gives Washington chokepoints—especially when counterparties need access to dollar clearing and dollar liquidity to function.
This is the context for Xi’s push: China wants insulation from that leverage, and it wants the ability to offer other countries an alternative.
Reserve-currency status isn’t a popularity contest. It’s a test of whether a currency is reliable when everything is not reliable during wars, defaults, banking panics, and sudden capital flight.
The dollar wins that test because it sits at the center of global trade and finance, and because the world has built routines around it. The Congressional Research Service summarizes the network effect bluntly: about half of international trade is invoiced in dollars, about half of international loans and global debt securities are dollar-denominated, and dollars appear on one side of nearly 90% of foreign-exchange trades.
Under that usage is something even more important: the supply of safe, liquid assets. The U.S. Treasury market is routinely treated as the world’s “safe asset” engine—enormous, constantly traded, and easy to enter or exit without spiking costs. The Federal Reserve Bank of New York notes the U.S. Treasury market is the largest securities market in the world, with nearly $30 trillion in marketable debt outstanding (as of September 30, 2025).
And despite years of “de-dollarization” talk, central banks still behave like the dollar is home base. In 2025 Q3, the International Monetary Fund reported the dollar at 56.92% of global FX reserves (with the yuan at 1.93%).
What Xi is building: more yuan traffic, more yuan rails
If reserve-currency dominance is a fortress, China’s approach is not to storm the walls—it’s to build roads around them.
One move is administrative and direct: push major Chinese firms to settle more overseas activity in yuan. In April 2025, People's Bank of China urged state-owned enterprises to prioritize yuan use in overseas payments and settlement, while also encouraging banks to expand cross-border yuan credit.
Another move is infrastructural: expand non-Western settlement pathways. China has promoted the Cross-Border Interbank Payment System (CIPS) as a yuan clearing and settlement network. As of October 2025, CIPS reported 187 direct participants and 1,559 indirect participants.
A third move is technological messaging—digital currency as modern plumbing. At the Lujiazui Forum in June 2025, Reuters reported China’s central bank governor pledged to expand international use of the digital yuan and establish an international operations center in Shanghai—explicitly framing legacy cross-border payment systems as vulnerable to geopolitical “manipulation.”
And yes, usage is rising at the margins. SWIFT data shows the RMB remained the 6th most active currency for global payments by value in November 2025, with a 2.94% share.
None of this makes the yuan the reserve currency tomorrow. But it does what China needs in the nearer term: it normalizes yuan usage—deal by deal, corridor by corridor.
The hard part: a reserve currency has to be easy to leave
Here’s the catch: reserve managers and global investors don’t just ask, “Can I buy this?” They ask, “Can I sell this—fast—if politics turns?”
That’s why convertibility and predictable market rules matter so much. The European Central Bank puts the common view plainly: the renminbi can’t develop into an international reserve currency without full liberalization of China’s capital account—because reserve holders want to buy and sell freely in deep markets.
Even within U.S. official research, the constraint is stated in practical terms. A Federal Reserve note argues China’s exchange-rate management and capital controls likely weigh on renminbi internationalization because they increase the risk that divesting renminbi assets could become difficult or costly.
That same Fed analysis also punctures the “rival the dollar soon” storyline: by an index of international currency usage, the renminbi sits at about a 2.5% share—far behind the dollar at 66%—and is “nowhere close” to overtaking it.
So the yuan faces a dilemma: the very controls that help Beijing manage domestic stability are the controls that make outsiders hesitate to treat the yuan as a true reserve asset.
The geopolitical prize: why this matters even if the yuan never “wins”
The dollar’s reserve role is not only about economics—it’s geopolitical influence.
Because so much global commerce and finance touches the U.S. financial system, Washington can use access as a pressure point. The Congressional Research Service notes that U.S. financial sanctions can impede access to the U.S. financial system, leveraging the dollar’s role to advance foreign-policy objectives—and that many governments explore ways to reduce reliance on the dollar in response. The Council on Foreign Relations similarly points out that demand for dollars enables cheaper U.S. borrowing and makes currency a tool of diplomacy, while extensive sanctions have pushed some countries to transact in other currencies.
From Beijing’s perspective, then, the yuan push is strategic insurance. You don’t need to dethrone the dollar to reduce vulnerability—you just need enough alternative channels that the world can’t be forced through a single gate.
What “success” probably looks like for China
A realistic outcome is not a new world where the yuan replaces the dollar. It’s a world where the dollar remains #1, but China increases yuan use:
in China-linked trade settlement, especially with partners who want optionality
through CIPS growth and bilateral arrangements
through a bigger role for the yuan in regional finance—without full global reserve status
The scoreboard today is still lopsided: in 2025 Q3, the IMF put the yuan at 1.93% of reserves versus the dollar at 56.92%. But the direction of China’s policy is consistent: more incentives, more rails, more normalization.
Kicker: The dollar’s dominance is an 80-year habit reinforced by the world’s deepest markets. China can build a second road. But a second road—however useful—is not the same thing as moving the capital.