In 1971, as the international monetary system hovered on the brink of collapse, U.S. Treasury Secretary John Connally offered a blunt assessment to a group of anxious European finance ministers: the dollar was, he declared, "our currency, but your problem."
The greenback had been enshrined as the global economy’s official reserve currency decades earlier, in 1944, under the landmark Bretton Woods agreement. This arrangement bound signatories tightly to the shifting whims of U.S. monetary policy. Even after the eventual collapse of Bretton Woods and the advent of freely floating currencies, the dollar’s dominance persisted. Over the past half-century, the reach of U.S. currency power has only widened as nations across the globe integrated more deeply into international trade, growing increasingly dependent on the dollar. Among them, China—relying heavily on an export-driven growth model—stands foremost.
Now, confronting the possibility that Washington could someday weaponize that dependence and make the dollar China’s problem, Beijing is steadily engineering its own systemic solution. In a high-level speech delivered in January 2024, Chinese leader Xi Jinping made these ambitions explicit, instructing senior provincial and ministerial officials to accelerate the country’s transformation into a "leading financial power." A strong currency, he emphasized, is one of the essential foundations of such power. When Qiushi, the flagship journal of the Chinese Communist Party, published the full text of the speech, the criteria Xi envisioned became clearer: for a currency to be considered genuinely strong, it must see widespread use in international trade, investment, and foreign exchange markets while earning recognition as a global reserve currency.
Xi’s directive represents the latest chapter in a long history of major powers attempting to reduce their exposure to the dollar-centric global financial system. In 1965, French Finance Minister Valéry Giscard d’Estaing famously characterized the disproportionate advantages conferred on the United States by dollar dominance as an "exorbitant privilege." That same year, France began aggressively converting a substantial portion of its dollar reserves into gold, a move that helped hasten the demise of the Bretton Woods architecture. Decades later, in 1999, the Japanese government released a comprehensive report detailing strategies to promote the wider international use of the yen. That same year, the launch of the euro provided Europe with the world’s second most important international currency, securing greater monetary autonomy even as the European Central Bank carefully avoided positioning itself as a direct challenger to the dollar.
What fundamentally distinguishes Xi’s ambition, however, is that China—unlike post-war Europe or Japan—possesses the sheer economic heft, industrial capacity, and political resolve to challenge U.S. geopolitical primacy. Not since the height of the British Empire has another nation’s currency stood a realistic chance of competing with the dollar on a global scale. A gradual financial transition from a system built entirely on the dollar to one where alternative powers hold substantial sway can no longer be dismissed as mere fantasy.
The internationalization of the renminbi would grant Beijing a vital degree of financial survivability should Washington ever choose to wield the dollar as a punitive economic weapon, much as it did against Russia following the full-scale invasion of Ukraine in 2022. The United States controls both the supply of the dominant global reserve currency and many of the critical financial infrastructure chokepoints through which it flows. If Washington so desired, it could severely restrict China’s access to dollar liquidity by making the cost of doing business with Chinese institutions prohibitive—for instance, by sanctioning or indicting a major Chinese bank. Such a move would severely shock the domestic Chinese financial system, drive up transaction costs for trade, and deliver a major competitive blow to China’s export sector, which accounts for roughly one-fifth of its gross domestic product.
Survivability, however, is merely a prerequisite for credible deterrence. To successfully deter the United States from deploying the dollar weapon, Beijing requires a financial second-strike capability. It must be capable of redirecting a substantial share of global trade and finance toward a renminbi-based network. The long-term durability of that shift ultimately depends on healthy global demand for an anchor asset priced in renminbi. For Beijing, the most promising source of such an anchor asset lies in its unmatched dominance of the global green energy economy.
Second Is the Best
Curiously, the near-universal acceptance of the U.S. dollar arguably benefits China more than any other nation outside the West. The Chinese economy relies heavily on exports, and Chinese goods priced and financed in dollars can reach ready buyers almost anywhere in the world. The resulting corporate profits can then be invested globally and converted into liquid funds on short notice. This suits Beijing well: China enjoys the full benefits of global liquidity without bearing the immense burdens of sustaining it.
To preserve the global dollar system, the United States must tolerate foreign ownership of an ever-expanding volume of dollar claims as nations conduct more and more business in the currency. U.S. markets are exposed to international volatility, and foreign entities hold varying degrees of influence over American corporations. The Federal Reserve, as the issuer of the dollar, backstops the entire framework, expanding its balance sheet during periods of acute financial stress when governments and private firms hoard dollars to ensure they can service debts and purchase vital goods. This openness has historically posed little threat to the U.S. economy because foreign shareholders generally operate within established U.S. business norms, while American banks earn substantial profits intermediating global capital flows through New York and London.
China’s leaders, by contrast, have no desire to make that trade-off. Maintaining a truly global renminbi system runs fundamentally counter to China’s state-led economic model. For the renminbi to replicate the functions of the dollar, China would need to create broad, two-way financial channels allowing foreign holders of the currency to reinvest their capital safely back into the domestic Chinese economy. The resulting capital inflows would fundamentally reshape domestic financial markets. It would prove impractical for Beijing to confine foreign investors to a narrow, highly regulated group of approved assets, as it does today. Once foreign investors were permitted into Chinese markets in force, they would inevitably arbitrage the economic distortions created by financial repression and politically directed capital allocation. Such direct competition would undermine one of Beijing’s most effective means of securing the loyalty of the domestic business class: tightly controlling who gains access to capital, on what terms, and for what precise purposes.
Moreover, for many wealthy Chinese citizens—including members of the Communist Party itself—the dollar serves as an indispensable form of political risk insurance. Domestic political rivalries can easily lead to sudden asset seizures or imprisonment with limited due process. Offshore dollar deposits and foreign corporate structures allow economic elites to diversify their holdings across different currencies and legal jurisdictions. Control of an overseas-listed company, especially in the United States, offers wealthy Chinese citizens more than prestige and access to global capital; it provides stringent disclosure obligations, duties to shareholders, and international visibility that extend beyond the immediate reach of the party. These constraints cannot entirely prevent interference by senior authorities determined to pursue specific targets, but they significantly raise the political and administrative cost, slow implementation, and create vital room for negotiation. The dollar-based financial system remains a reliable refuge for Chinese elites who fall from grace, and because no official’s position is ever entirely secure, few wish to see that refuge dismantled.
Use It or Lose It
China remains entirely willing to operate within a world kept turning by the dollar. Yet, it cannot abide the unilateral weaponization of that currency, and the renminbi still has substantial ground to cover before it is strong enough to blunt that threat entirely. If more nations and foreign businesses are to adopt the renminbi, a robust global financial infrastructure must first be built to support its use. Beijing has already laid foundational stones by facilitating renminbi usage among firms across more than a hundred countries and within a growing array of commodity markets for trade settlement, financing, and risk hedging. Here, breadth matters far more than depth; even modest daily transaction volumes can keep payment channels operational, preserve financial relationships, and maintain the administrative expertise needed to run an alternative financial system.
Because China’s primary relative economic strength lies in the flow of manufactured goods—accounting for roughly 20 percent of global manufactured exports—Beijing has concentrated its efforts on building a payment network explicitly tailored to commercial flows. In 2005, Zhou Xiaochuan, then governor of the People’s Bank of China (PBOC), publicly encouraged the rising use of local currencies among trading partners. In 2009, the PBOC launched a pilot program for settling cross-border transactions in renminbi, followed in 2015 by the creation of the Cross-Border Interbank Payment System (CIPS), the backbone of China’s international renminbi network.
CIPS began with 195 participants spanning 50 countries. By mid-2026, participation had expanded to 1,829 entities capable of routing payments to more than 5,200 banking institutions across 191 nations. Despite this growth, CIPS remains vastly smaller than the mature wholesale payment systems supporting the dollar and the euro. In 2025, the U.S.-based Clearing House Interbank Payments System processed an estimated 19 times as much value in international payments as CIPS, while Europe’s real-time gross settlement system, T2, cleared roughly 14 times as much.
However, payment volume alone serves as a misleading measure of true currency power. An international transaction entails far more than a simple transfer of economic value; it requires a comprehensive package of financial services spanning five linked stages: pricing, financing, risk transfer, payment, and reinvestment. The dollar maintains its commanding dominance because it functions as the default currency at every single stage, with its strength in each reinforcing its position across all the others. For the renminbi to truly supplant the dollar, it would need to achieve competitiveness across the entire transaction cycle.
Beijing’s state-owned enterprises are driving the ongoing expansion of this financial network. By denominating invoices, contracts, and overseas project financing in renminbi, these corporate giants create a reliable base of recurring demand around which Chinese banks, insurers, and financial institutions can construct competing business lines under state oversight. To reinforce this base, the Communist Party issued an action plan instructing state enterprises to prioritize renminbi settlement over dollars whenever dealing with foreign suppliers and customers. This strategy is visibly fostering a regional network across Southeast Asia, where renminbi payments involving economies in the Association of Southeast Asian Nations (ASEAN) rose significantly, with two-thirds of those transactions occurring directly between ASEAN member states.
The Cost of Entry
Beijing has largely completed the initial phase of its strategy by establishing a solid foothold in payments, and it is now expanding upstream into pricing, financing, and risk transfer, while cautiously exploring downstream reinvestment. Historically, China was content to price the vast majority of its imports and exports in dollars. According to International Monetary Fund estimates, only a small fraction of China’s exports were invoiced in renminbi. While official Chinese statistics show that nearly 30 percent of trade in goods is settled in renminbi, much of that activity essentially masquerades as a dollar transaction: Chinese exporters invoice in buyers who obtain dollar funding, with funds converted into renminbi only immediately prior to hitting the mainland.
To reverse this pattern, the government is actively promoting "China prices"—renminbi-denominated benchmark prices listed on domestic exchanges for major imported commodities. Greater autonomy over pricing enables Chinese firms to purchase raw inputs and manage exposure to commodity price swings without acquiring dollars. It also grants authorities greater influence over reference prices used in supply contracts. This leverage is critical for ensuring the steady flow of raw inputs essential to China’s manufacturing sector.
Price autonomy is particularly vital for critical minerals that feed the green industries central to Beijing’s economic strategy. China produces more than 80 percent of the world’s batteries and consumes over 75 percent of its lithium, 70 percent of its cobalt, and roughly 60 percent of its nickel. The country has made the most progress in lithium; more than 90 percent of global trading in lithium-carbonate futures now occurs on the Guangzhou Futures Exchange, where contracts are denominated in renminbi. Recently, the exchange opened trading directly to foreign participants, positioning China to become the principal financial center for a globally vital commodity for the first time in modern history. Nickel and cobalt, meanwhile, remain anchored to traditional dollar benchmarks in Western markets, a discrepancy Beijing is actively seeking to resolve.
The financing arm of the strategy is also gaining momentum. State-backed lenders such as the Export-Import Bank of China have increased renminbi lending for overseas trade and infrastructure, while commercial banks supply greater volumes of trade finance. Between 2023 and mid-2026, Chinese financial institutions more than doubled their renminbi lending to overseas borrowers. Concurrently, the PBOC has established currency swap agreements with 32 foreign central banks and monetary authorities, including those in Saudi Arabia, the United Arab Emirates, and the European Central Bank, providing direct commercial support during periods of market stress.
Green Standard
For China to wield currency power comparable to that of the United States, the renminbi must ultimately dominate trade in a strategic commodity that China controls and the rest of the world cannot easily do without. Within the dollar system, the global oil trade has historically played this central role, giving rise to the term "petrodollar." In a renminbi-ascendant system, the corresponding anchor could well be critical minerals, clean energy equipment, and electrical infrastructure essential to the green energy transition. If China consolidates its dominance over this industrial ecosystem, it could gain sufficient market leverage to price these indispensable exports in renminbi, establishing the foundation for a "green yuan" that might one day rival the petrodollar.
China has spent decades methodically assembling the supply chains that make it the world’s leading producer of green energy technology. Beijing now commands vertical integration across nearly the entire clean energy supply chain, serving as the leading refiner of 19 out of 20 energy-related strategic minerals tracked by the International Energy Agency. It accounts for roughly 85 percent of global solar panel manufacturing capacity, supplies 78 percent of global wind-turbine capacity, and produced approximately 70 percent of the world’s electric vehicles.
By leveraging economies of scale and technical standards built around domestic technologies, Beijing is turning its market-share lead into structural advantages. While the green energy economy is inherently more diffuse than the legacy fossil fuel system, China is successfully translating its industrial heft into financial mechanisms, developing green bond markets and sustainable investment instruments that attract international participation.
Ultimately, Beijing is not plotting to violently dethrone the dollar, and the Communist Party likely does not desire the full financial openness such an outcome would require. Whether or not the green yuan fully materializes, the more immediate value of an internationalized renminbi for Beijing lies in its potential to deter Washington from further weaponizing China’s reliance on the dollar. As China’s alternative financial networks grow increasingly resilient, the threat of U.S. sanctions will progressively lose its potency, altering the global economic balance of power and offering Beijing a reliable shield against future geopolitical shocks.
