1. China’s RMB Internationalisation: Context and Constraints
For over a decade, China has sought to internationalise the renminbi (RMB) as a potential rival to the US dollar. This ambition reflects China’s growing economic weight and its desire for greater monetary sovereignty in the global financial system.
However, Chinese policymakers have been cautious. Full capital account convertibility and a fully market-determined exchange rate are viewed as risks that could trigger volatility, financial instability, and social unrest. As a result, RMB internationalisation has progressed in a controlled and selective manner.
This cautious approach explains why the RMB has not emerged as a true peer competitor to the US dollar, despite China’s scale in trade and production. Ignoring these constraints would expose China to destabilising capital flows.
The governance logic is that monetary internationalisation without domestic financial resilience can amplify systemic risk. Excessive haste could undermine internal stability.
2. Sanctions Risk and the Weaponisation of Finance
A central driver of China’s recent financial strategy is the risk of sanctions and exclusion from dollar-dominated systems. Global payment infrastructure remains heavily concentrated in US- and Europe-based institutions.
Systems such as CHIPS and SWIFT form the backbone of international finance. Countries excluded from this “financial plumbing,” as seen in the cases of Iran and Russia, face severe economic disruption.
China’s objective has therefore shifted towards making its economy “sanction-proof” by reducing dependence on these channels. Failure to address this risk would leave China vulnerable to geopolitical coercion.
Key global payment systems:
- CHIPS daily turnover: $1.8–2 trillion
- SWIFT messages per day: 44–48 million, involving ~$10 trillion
“The weaponisation of interdependence has become a defining feature of modern geopolitics.” — Henry Farrell & Abraham Newman, Foreign Affairs
The development logic is that control over financial infrastructure translates into geopolitical power. Ignoring this reality weakens strategic autonomy.
3. Reducing Dollar Exposure: Reserves and Gold Strategy
To mitigate sanctions risk, China has steadily reduced its exposure to dollar-denominated assets. This marks a structural shift in reserve management rather than a short-term portfolio adjustment.
China’s holdings of US Treasuries have declined sharply, while gold accumulation has accelerated. Gold provides a non-sovereign, sanction-resistant store of value, enhancing reserve security.
These steps signal a deliberate move away from dollar-centric reserve composition, even if the dollar remains dominant globally.
Reserve diversification:
- US Treasuries: 1,072billion(2020)∗∗→∗∗1,072 billion (2020)** → **1,072billion(2020)∗∗→∗∗713 billion (Nov 2025)
- Gold purchased in 2025: 2,306 tonnes
- Gold share of forex reserves: 8.5%
“Gold is the most enduring form of monetary insurance.” — Alan Greenspan
The governance logic is that reserve diversification enhances financial resilience. Ignoring concentration risks exposes reserves to geopolitical shocks.
4. Building Parallel Payment Infrastructure: CIPS and Trade Settlement
Alongside reserve diversification, China has developed its own payments architecture. The China International Payments System (CIPS) and its messaging layer, CIPS Connect, are designed as alternatives to CHIPS and SWIFT.
While still smaller in scale, CIPS has expanded rapidly, reflecting growing acceptance among China’s trade partners. This infrastructure supports RMB-based trade settlement and reduces reliance on dollar clearing.
China’s trade settlement in RMB has increased significantly, reinforcing the currency’s external use even without full convertibility.
Payments and trade data:
- CIPS payments in 2025: $25 trillion (↑ 43% YoY)
- China’s total trade: $6 trillion
- Trade settled in RMB: 40% (vs 25% in 2015)
The development logic is that infrastructure precedes currency power. Without alternative systems, de-dollarisation efforts remain symbolic.
5. Digital Currency and Energy Trade: mBridge and Petro-Yuan
A major innovation in China’s strategy is the mBridge project, enabling instant cross-border settlement using central bank digital currencies (CBDCs). This system bypasses both the US dollar and traditional correspondent banking.
Participants include the People’s Bank of China, Hong Kong Monetary Authority, and central banks of the UAE, Thailand, and Saudi Arabia. mBridge has already processed significant transaction volumes.
Linking mBridge with the Shanghai International Energy Exchange has enabled oil trade settlement in RMB, creating a functional “petro-yuan” market and reducing exclusive reliance on the petro-dollar system.
Digital and energy trade data:
- mBridge transactions (Jan 2026): $55 billion
- Saudi oil trade settled in Shanghai: 15%
“Digital currencies will reshape cross-border payments and monetary sovereignty.” — Bank for International Settlements (BIS)
The governance logic is that technology can reconfigure financial power. Ignoring digital rails risks strategic obsolescence.
6. From Dollar Rivalry to Multipolar Currency Order
By 2015, China aimed to make the RMB a direct rival to the US dollar. This goal has since been recalibrated. Full displacement of the dollar is no longer the stated objective.
Instead, China is constructing a parallel financial ecosystem that allows coexistence outside the dollar system. The governor of the People’s Bank of China has articulated this as “multipolar co-existence,” where several sovereign currencies balance each other.
The RMB is thus positioned as a credible alternative in scenarios where the dollar is perceived as weaponised, not as a universal replacement.
“A few sovereign currencies exist, compete and check and balance each other.” — Pan Gongsheng, Governor, People’s Bank of China
The development logic is that monetary power is evolving from monopoly to plurality. Ignoring this shift risks misreading the future global financial order.
Conclusion
China’s RMB strategy reflects pragmatism rather than confrontation. Unable and unwilling to meet the conditions of full currency internationalisation, China has focused on building sanction-resistant alternatives in reserves, payments, trade settlement, and digital finance. This approach signals a gradual move towards a more fragmented but resilient global monetary system, with important implications for global governance, emerging economies, and financial stability.
“The international monetary system is entering a period of managed fragmentation.” — IMF, Global Financial Stability Report
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