Why the RMB is not trying to topple the dollar

Over the past few weeks, a run of headlines has again tempted pundits to predict the US dollar’s demise. Ethiopia, Sri Lanka and Kenya are moving to convert US-dollar-denominated debt into RMB-denominated obligations, while Indonesia issued its first offshore RMB-denominated “dim sum” bond, and Argentina has been paying its IMF debts in RMB.

Meanwhile, China and South Korea agreed to a five-year currency swap worth 400 billion RMB/70 trillion won (US$56.1 billion), the latest in a series of such arrangements after similar deals with Turkey in June, Thailand in August, and the EU, Switzerland and Hungary in September. 

Each item is small on its own; together they signal a pattern that is easy to sensationalise and just as easy to misunderstand. However, the right takeaway is not that Beijing is toppling “King Dollar”, but that it is hardening the world’s financial plumbing against single-currency chokepoints — starting with its own.

With intensifying US–China rivalry, finance — the core pillar of US hegemony — is likely to become the next arena of competition, and perhaps the ultimate decisive one. But that shift is unlikely to materialise any time soon. In fact, according to the Bank for International Settlements (BIS)’ 2025 Triennial Central Bank Survey, the US dollar still dominates global foreign exchange markets, appearing on one side of 89.2% of all trades, up from 88.4% in 2022.

By contrast, although the RMB has risen to become the world’s fifth-most-traded currency, its share has only edged up to 8.5%. Similarly, in September 2025, the RMB accounted for just 3.17% of global payment values routed through SWIFT, while the US dollar made up 47.79%. Taken together, these figures underscore that recent steps towards RMB internationalisation are incremental rather than revolutionary.

At the same time, China’s recorded holdings of US Treasuries fell to about US$730.7 billion — its lowest since 2008 — as Beijing diversifies and shortens duration across its reserve book while continuing a renewed central-bank gold-buying streak through the summer. None of this flips the system; all of it changes the incentives inside it. 

Consider the mBridge line-up. The platform, built by the BIS Innovation Hub with Hong Kong’s, the UAE’s, Thailand’s and China’s central banks, reached minimum viable product (MVP) status in mid-2024 and is now onboarding more participants, including the Saudi Central Bank. If it scales, mBridge will let banks move value directly in central-bank digital money across borders — instant gross settlement without touching New York’s correspondent network. That is not a new “global currency”; it is a new piece of pipe. But pipes matter. They decide who can route around sanctions, outages or geopolitics at the flick of a switch.

On the commodity front, the more interesting story is not “RMB pricing” bombast, but settlement optionality. Since late 2022, Russia has pushed counterparties towards non-dollar flows; by October 2025, traders supplying Russian barrels were again asking India’s state refiners to pay in RMB, and at least a handful of cargoes reportedly cleared that way. The contracts are still mostly dollar-denominated; the value transfer can be in something else. Once that distinction sinks in, the breathless “petroyuan versus petrodollar” frame looks like the wrong fight. Function beats symbolism.

The Gulf offers a clearer view of how Beijing is building redundancy rather than replacement. The People’s Bank of China in October authorised First Abu Dhabi Bank (FAB) as an additional RMB clearing bank in the UAE — the first local bank in the region — effectively doubling the local pipes that connect Emirati banks to the Chinese payment stack. In June, FAB also joined the Cross-border Interbank Payment System (CIPS), China’s RMB-focused international settlement network authorised by the People’s Bank of China and launched in 2015, becoming the first MENA bank directly linked to the system.

Meanwhile, the Emirate of Sharjah has re-opened its Panda bond window in China’s interbank market, while cross-border RMB usage in the UAE continues to grow at double-digit rates. These are the unglamorous tasks of infrastructure and market-making, which are also the bits that keep trade moving if Washington ever slams a financial door.

Indonesia’s debut 6 billion-RMB dim sum deal sits in the same category. It is not a referendum on dollar primacy; it is a sovereign hedging its funding base, tapping an Asian investor pool in a currency aligned with its supply-chain geography. If more ASEAN and Gulf sovereigns follow — alongside state-owned enterprises in energy and mining — China would get a thicker RMB asset shelf offshore, deeper liquidity in the currency, and a gradual migration of working capital and trade finance towards a multi-currency norm. That is how currency systems actually shift: not through grand pronouncements, but through a thousand procurement decisions and term sheets.

All this squares with what economists have argued for years: distinguish between functional roles of money (payments, invoicing, trade finance) and foundational roles (store of value and reserve asset). Beijing is pushing hard on the former and — by design — accepting limits on the latter. The “impossible trinity” makes that unavoidable. A country cannot have a tightly managed exchange rate, sovereign monetary policy and free capital movement all at once.

China has long prioritised a managed rate and policy control, so it cannot open the capital account enough to offer the world the depth, convertibility and due-process protections that make the dollar the world’s default savings vehicle. To put it plainly, you can convince a soybean exporter to take RMB; you will not soon convince Norway’s oil fund to park a double-digit share of its portfolio in RMB credit. That is a feature, not a bug, of China’s strategy.

The same realism explains Beijing’s reserve management. Letting Treasury holdings roll down and lifting gold gives China marginally more autonomy if relations sour, but it does not liberate it from dollar finance. It cannot, because dollar assets are still the deepest, cleanest collateral pool on earth, and because the US still exports the safe asset the rest of the system demands.

The point is not to quit the system; it is to ensure the system cannot be used against you. After Russia’s reserves were immobilised in 2022 following the Ukraine conflict, that is no longer a theoretical risk. Gold in the vault and a broader mix of dollar and non-dollar paper are sensible countermeasures.

So what is changing? First, the plumbing. CIPS, onshore/offshore swap lines, RMB clearing banks from Abu Dhabi to Zurich, mBridge corridors and Panda/dim sum shelves together form a second track around the dollar’s mainline. It is narrower and bumpier, but it exists and is getting wider.

Second, the calculus. If you are a treasury chief in Jakarta, Riyadh or São Paulo, the option value of having non-dollar rails is rising. You may still price your cargoes in dollars; you may still keep most reserves in greenbacks; but you will increasingly settle some flows in RMB, fund a project in dim sum, and add a slice of RMB bills to the liquidity bucket — especially when the macro or politics make a single-currency strategy feel like unnecessary risk.

Where does that leave the dollar? Still on top — in payments, in savings, in swap-line backstops and in behavioural habit. SWIFT’s league table shows how entrenched that incumbency is: dollar and euro still dominate, and the RMB’s share, though rising, is a rounding error next to them.

Much of the “de-dollarisation” chatter mistakes use for centrality. A rise in non-dollar use — RMB cargoes here, rupee-dirham trades there — does not dethrone the dollar’s centrality, which is anchored in US capital markets, the rule of law, deep collateral chains and the Federal Reserve’s crisis backstop. Those assets get tested, of course — by fiscal dysfunction, ratings noise and bouts of macro volatility — but nothing else is close yet.

There is a temptation in Washington to dismiss all of this as theatrics and a matching temptation among Beijing’s boosters to declare victory. Both should resist.

The rational US response is not to panic about the RMB, but to shore up what makes the dollar indispensable — sound fiscal management over time, predictable institutions, deepening rather than fragmenting capital markets — and to use financial sanctions with more restraint, precisely to preserve their deterrent value.

The rational Chinese response is to keep doing the boring things — more clearing banks, more swap lines, more pilots, more trade settlement — while accepting that capital controls cap the RMB’s foundational reach. If Beijing ever wants the latter, it knows what it would have to give up at home.

For the rest of the world, a more multi-currency function with a still-dominant dollar foundation is not a bad place to be. It means more choice and marginally more resilience. It does not mean a new monetary hegemon is waiting in the wings. Think of the global monetary order as a power grid: the dollar remains the main plant; China is building substations and backup lines. When storms hit, those backups matter, even if the main plant keeps supplying most of the power.

None of this gives the RMB a free pass. Trust is earned, not declared, and it is earned in courts, in convertibility commitments and in the behaviour of the sovereign under stress. But to focus only on whether the RMB can “replace” the dollar is to ask the wrong question. The right one is whether the system is becoming less brittle and less singular.

On that score, October’s seemingly disparate headlines — South Korea-China currency swap, Russia-India yuan oil payments, Auralia’s iron ore priced in RMB, Indonesia’s dim sum debut, FAB’s clearing mandate in Abu Dhabi, and the slow drip of China’s reserve rebalancing — describe a clear, coherent arc. The RMB is not seizing the crown. It is widening the escape routes.

Related: How the RMB is taking over the dollar’s role in global trade | Global trade in flux: What the weakening dollar and RMB mean for the world