China’s currency ambitions to put the yuan ahead of the US dollar are gaining pace with the Xi Jinping administration repeatedly pulling several policies, but all in vain. The Communist country set the stage for de-dollarization the same day when the US imposed sanctions on Russia. The timing was correct with the phrase ‘being at the right place at the right time,’ taking its side.
According to the Qiushi journal, Jinping told government officials that China must aspire to establish “a strong currency widely used in international trade and foreign exchange,” with a “powerful central bank.” He wants officials to embed the Chinese yuan vs the US dollar in their work and power up the currency. There is nothing wrong with aspiration and ambition, but the stage is inadvertently crooked.
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Why the Chinese Yuan Cannot Defeat the US Dollar
China’s yuan domination by toppling the US dollar did not come organically; it came through sanctions on Russia. Jinping made opportunistic moves to gain leverage over the global dissatisfaction of the White House weaponizing the currency. No country deliberately wanted to use the Chinese yuan on its own and sideline the US dollar.
The narrative was forced by China in an effort to push its currency on a global scale. Dinny McMahon, head of markets research at Trivium China, said that the Chinese currency offers nothing to traders. The currency provides no liquidity, no trust, and no large-scale transactions. This dims the challenge to the US dollar as the Chinese yuan does not safeguard investors’ interests.
“To get people to use renminbi, you’ve kind of got to carve out a niche, and it’s been really difficult,” said McMahon. “Now the way that the Party thinks about it is, ‘Oh, we’re in a really unique moment in time, because people are becoming disillusioned with the dollar.’” It doesn’t work that way, and no one wants to openly embrace the local currency. In conclusion, despite the tall and big ambitions, the Chinese yuan still cannot replace the US dollar.
