China is coming, slowly, for the dollar
Atlantic Council data shows the dollar still dominates trade and FX, but China's competitor is gaining ground.
China is quietly making moves to challenge the dominance of the U.S. dollar in global finance. In August, the country's alternative to dollar-denominated transactions saw a record daily volume, indicating a growing interest in its parallel financial system. This surge in activity, which began last spring amid the Iran war and the subsequent sanctions on sanctioned companies, appears more like a steady increase rather than a temporary spike.
The data from Atlantic Council researchers Jessie Yin and Lize de Kruijf suggests that while the greenback remains the backbone of most global trade and foreign-exchange transactions, there are worrying signs beneath the surface. Josh Lipsky, the Atlantic Council's chair of international economics, notes that the overall figures remain stable, but there are troubling indicators.
Despite Beijing's efforts to expand the use of its currency, the renminbi, in central-bank reserve coffers, the top line numbers have remained stable since 2022.
However, crises can often shift the balance. The number of direct participants in Beijing's cross-border interbank payment system has more than doubled since Russia's invasion of Ukraine. This development comes as Western financial networks are being weaponized to freeze Russian assets. This shift in the financial landscape, driven by geopolitical events, could potentially weaken the dollar's dominance and pave the way for China's parallel financial system to gain a more substantial foothold.
Written by urgent.news from Semafor's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
