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China’s strategy to internationalise the renminbi (RMB) is about building resilience and influence through selective, state-managed global integration. Beijing is not seeking to elevate the RMB to the status of a global reserve currency on par with the dollar, nor is the strategy solely about insulating China from the geopolitical risks of dollar dependence, although this is an important component. Rather, it represents a pragmatic response to an increasingly fragmented global economy—one marked by rising geopolitical tensions, growing weaponisation of the dollar, and accelerating financial and technological innovation.

China is pursuing a targeted, state-managed form of internationalisation that involves building an alternative web of financial relationships and infrastructures facilitating transactions outside the US-dominated system. These include currency swap lines with strategic partners, the establishment of RMB clearing banks, bilateral trade settlement mechanisms, and payment infrastructures such as the Cross-Border Interbank Payment System (CIPS), which serves as a partial alternative to SWIFT.

While these efforts help reduce exposure to potential disruptions from dollar weaponisation, they are part of a broader strategy to embed the RMB in key transactional domains like trade, investment, and energy. In these spheres, China seeks to expand its influence and establish rules and mechanisms conducive to its own strategic and financial interests.

Building functional alternatives to the US dollar

China’s RMB internationalisation strategy is multi-layered, spanning bilateral currency swaps, RMB clearing arrangements, development finance, and payment system alternatives. Instruments such as RMB-denominated oil trades (referred to as the “petroyuan”) and the digital yuan illustrate this approach. The petroyuan enables sanctioned countries like Russia and Iran to settle oil trades in RMB, while China’s growing financial ties with Gulf states suggest that broader adoption may follow.

Similarly, the digital yuan, though originally intended primarily for domestic use, is now being piloted for cross-border transactions, potentially laying the groundwork for an international digital payments network. Technological innovations are facilitating this shift by enabling the creation of central bank digital currencies, alternative financial messaging systems, and blockchain-based settlement tools—all of which can support secure transactions that operate outside traditional dollar-clearing infrastructure. In the long run, such developments could gradually reduce global reliance on the dollar.

These initiatives are less about achieving global reach and more about securing strategic autonomy and expanding influence in key domains. China’s aim is to reduce vulnerability to US sanctions and dollar volatility, while gradually expanding the RMB’s role in trade, energy, and infrastructure finance, especially in the Global South, where demand for alternatives is growing.

BRICS+, the BRI, and the strategic reach of the RMB

Platforms like the Belt and Road Initiative (BRI) and BRICS+ play an important role in China’s RMB internationalisation strategy. They provide the geopolitical and institutional scaffolding for RMB usage in trade and investment, particularly in politically aligned or dollar-constrained contexts. For instance, RMB settlements with BRI countries reached 5.42 trillion yuan in 2021, and China has concluded dozens of currency swap agreements with its partners. While the lion’s share of these transactions is still conducted in US dollars, RMB usage is growing steadily. These arrangements point to a shift toward a multipolar and domain-specific currency landscape—one where the RMB gains traction in selected spheres, even if it remains marginal in global reserves and FX markets.

Currency swap agreements, RMB clearing banks, and trade invoicing in local currency are all being promoted among China’s partners, especially those looking to reduce reliance on Western financial systems. The result is a modest but growing network of RMB-based interaction shaped by political alignment and strategic institutional design, rather than spontaneous market demand.

While dollar dominance persists, de-dollarisation gains momentum

The US dollar still dominates global finance. It accounts for nearly 90 percent of FX transactions and more than half of global reserves. However, that dominance increasingly rests on geopolitical foundations that are showing signs of strain. Trump 2.0’s chaotic tariffs combined with the US’s aggressive use of financial sanctions in recent years have made allies and adversaries alike question the long-term reliability of the dollar-based system.

For countries exposed to US foreign and economic policy swings, whether through sanctions, interest rate volatility, or trade frictions, China’s RMB-based alternatives offer a way to diversify. In this sense, de-dollarisation is not a revolution but a structural recalibration: a rebalancing of risk rather than a zero-sum rivalry with the dollar. What China offers is not a wholesale exit from the dollar system, but an incremental hedge—a monetary space in which RMB-denominated transactions gain traction in contexts where diversification and reducing dollar dependence are prioritised.

This logic underpins a broader push within the BRICS+ grouping to reduce reliance on the dollar in trade and finance. The group has floated proposals for a shared reserve currency, possibly backed by a basket of member currencies or commodities like gold, as part of its effort to foster a more multipolar monetary system. While such proposals face significant practical challenges, they reflect a clear political intent to diversify away from dollar-dominated structures. China plays a central role in these efforts, not by promoting the RMB as a global hegemonic currency, but by embedding it in alternative financial arrangements. In doing so, China contributes to a monetary order where the dollar remains dominant but increasingly contested.

Why RMB leadership is not only unlikely but unnecessary

Despite growing cross-border use of the RMB, significant structural constraints remain. China’s capital account remains closed, its financial markets lack transparency and depth, and its central bank operates under the authority of the party-state and, as such, lacks institutional independence. Unlike the US, which issues dollars globally through persistent trade and capital account deficits, China runs a trade surplus. This further limits the global supply of RMB and restricts its viability as a reserve currency. Central banks are unlikely to adopt the RMB as a core reserve asset under such conditions, and China has little interest in changing that right now—Beijing’s RMB internationalisation strategy is designed to work within, not against, these constraints.

Indeed, the party-state’s emphasis on control and stability sits uneasily with the financial liberalisation required for global monetary leadership. In Beijing’s view, this is not a contradiction. The goal is not to supplant the dollar, but to achieve selective integration: a system in which China and its partners can transact securely, predictably, and independently of Western pressure. This approach enables China to expand its influence within specific domains, without challenging the broader dollar-centric monetary order.

Adapting to a divided global economy

RMB internationalisation is neither a bid for currency supremacy nor a mere act of self-defence. It is a tool of pragmatic adaptation—part of China’s effort to build resilience and exert influence through selective financial integration and institutional alternatives.

As the world moves further into geopolitical and economic uncertainty, especially with the return of a Trump administration bent on upending the global trade system, China’s efforts may accelerate. The RMB won’t displace the dollar anytime soon, but its growing role in alternative trade, finance, and payment systems signals the slow but significant emergence of a more layered, fragmented, and contested global monetary order.

This work has received funding from the European Union’s Horizon Europe coordination and support action 101079069–EUVIP–HORIZON-WIDERA-2021-ACCESS-03. Views and opinions expressed are however those of the author(s) only and do not necessarily re ect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the granting authority can be held responsible for them.

This article is published under a Creative Commons License and may be republished with attribution.