Barackface: China's De‑dollarization: Steady But Gradual

Saturday, July 05, 2025

China's De‑dollarization: Steady But Gradual

1. 🛠 De‑dollarization: steady but gradual

The People’s Bank of China (PBOC) has raised its mandate for yuan trade settlement: banks must now use the renminbi for at least 40% of cross-border trade, up from 25% (reuters.com).
Chinese state banks have significantly shifted loan and trade finance portfolios toward RMB—Chinese global bank lending now includes nearly 40% RMB, compared to under 20% a few years ago .
SWIFT data indicates the yuan is now the fourth most used currency globally, comprising about 4% of global payments, while the dollar remains about 40–50% (reuters.com).

2. eYuan (digital RMB) progress

📈 Usage to date

Since its public pilot in 2020, China has seen over 260 million wallets and around ¥7 trillion (~$1 trillion) in domestic transactions by 2024, spread across retail, transit, welfare and salaries .
Nearly 10 billion worth in transactions and ~140 million wallet downloads reported earlier (bitcoininsider.org).
1.5 million merchants are set up to accept e‑CNY; pilot features include offline NFC, SIM‑card storage, and transport payments (cryptorank.io).

🌐 Cross-border efforts

Pilot programs exist in Hong Kong and select FTA zones, enabling cross-border wallet use (reuters.com).
PBOC has pledged to push e‑yuan internationally, invoking a “multi‑polar currency system” vision (reuters.com).

3. China’s leverage

China is now the largest trading partner for over 140 countries . That large trade footprint gives it natural reasons to promote the yuan and e‑yuan in settlements—whether via CIPS (their SWIFT alternative) or making e‑yuan the default for BRI‑aligned countries. However, trust, liquidity, capital freedom, and legal transparency are still major hurdles .

4. Future roadmap

Scaling pilot zones: expanding testing beyond current FTZs using the “Shanghai model” (reuters.com).
Stablecoins: tech giants (Ant, JD.com) seek to launch offshore yuan-backed stablecoins to deepen global liquidity (reuters.com).
State enterprise drive: PBOC urges SOEs to use RMB/e‑yuan for trade and overseas investment (en.wikipedia.org).
Integration with gold, euro: central banks increasingly eye yuan (+e‑yuan) as part of reserve diversification (reuters.com).
Digital infrastructure ramp-up: continued improvements—offline payments, programmable currency, blockchain integrations .

5. Challenges & headwinds

Dollar dominance remains overwhelming—USD still ~45% of global payments, 80% of trade finance (reuters.com).
Trust and restrictions: limited capital convertibility, geopolitical mistrust, and internet censorship reduce appeal.
First-mover fatigue: domestic mobile platforms (WeChat/Alipay) still dominate. PBOC integration is slow (gsb.stanford.edu, reuters.com).
Global regulatory caution: countries wary of giving China financial surveillance power; partnerships limited.

✅ Bottom line

China has made measurable progress in both de-dollarizing trade and rolling out its digital currency domestically, backed by strong infrastructure and regulatory support. Its vexing challenge is translating this into real international usage. Leveraging its global trade heft helps, but deep, trusted, liquid international usage will require time, openness, and coordination with like-minded economies.

🧭 What to watch next

Area	Indicator
Offshore e‑yuan	Rollouts in Hong Kong/FTZ, stablecoin approvals in HK/Singapore
CIPS reach	Increased counterparties and international bank connections
Trade invoicing	Percent of BRI trade settled in RMB/e‑yuan
Reserve usage	Central bank reserve allocation data (RMB share)

China is laying the infrastructure and incentive framework to challenge dollar dominance—step by step. But until global capital mobility, trust, and scale catch up, the dollar's reign remains unshaken.