Rethinking China’s renminbi strategy in a fragmenting global economy.

In Brief

China’s renminbi (RMB) internationalisation strategy seeks to reduce reliance on the US dollar by fostering a multipolar currency system tailored to a fragmented and uncertain global economy. Emphasising strategic autonomy, China avoids full currency liberalisation and instead promotes selective RMB use through bilateral trade settlements, digital payment platforms and the Belt and Road Initiative. Rather than aiming for global dominance, the strategy focuses on pragmatic expansion within key economic and geopolitical domains.

In a fragmenting global economy, China’s push to internationalise the renminbi (RMB) reveals how economic and financial linkages are being selectively reshaped by Beijing in response to growing geopolitical uncertainty.

The RMB is not ‘going global’ in the way many imagined. It is not challenging, let alone replacing, the US dollar — though the chaotic, disruptive and short-sighted approach of Trump 2.0 may accelerate the erosion of dollar confidence and open space for alternatives. And it is not transforming China into a global financial hegemon.

But these observations miss the point. China’s approach to RMB internationalisation focuses on expanding its capacity to operate across a more fragmented and geopolitically contingent global economy. China is incrementally and pragmatically experimenting with new financial infrastructures that better suit its global ambitions, economic model and risk preferences.

Some analysts have framed China’s RMB strategy as a response to the growing weaponisation of the US dollar. RMB internationalisation is seen as a hedge against a looming ‘financial war’ — a way to reduce vulnerability to financial sanctions and exclusion from dollar-based systems.

This interpretation captures a significant strand of Beijing’s thinking, particularly in light of escalating US–China tensions and the growing use of financial sanctions by the United States and its allies. But it underplays the underlying logic of China’s strategy — one that is not only defensive, but also increasingly geared towards reshaping how trade and cross-border transactions are structured and settled across emerging regional arrangements and digital payment systems.

China’s approach is shaped by a broader understanding of global economic fragmentation and its consequences. Rather than pursuing full currency liberalisation or direct rivalry with the dollar, it is developing a selective and adaptive strategy. China’s aim is not to dominate the global currency system, but to cultivate a functional RMB ecosystem that prioritises multipolarity and flexibility in trade and finance.

This includes expanding bilateral swap lines through the People’s Bank of China, enabling RMB denominated oil trade with key suppliers, experimenting with the digital yuan, promoting the petroyuan and constructing a payments infrastructure through the Cross-Border Interbank Payment System as an alternative to SWIFT.

Hong Kong is pivotal in this strategy, serving as a hub for RMB-denominated ‘dim sum’ bond issuance and a key conduit for cross-border capital flows. Its semi-autonomous status under the ‘one country, two systems’ framework enables controlled experimentation with offshore RMB instruments and limited capital account openness, without exposing the mainland to the risks of full liberalisation. Hong Kong supports the selective expansion of RMB usage while preserving China’s broader objectives of control and stability.

These initiatives reflect pragmatic adaptation, where policies are tested and adjusted in response to shifting domestic priorities and external conditions. By maintaining capital controls and prioritising trade-related mechanisms — such as settlement in bilateral trade, commodity deals and the Belt and Road Initiative — China signals a preference for expanding its currency’s reach through trade-based internationalisation.

This approach enables Beijing to promote RMB use where interests and incentives align, particularly with partners in the Global South, while avoiding the risks associated with full currency convertibility or exposure to volatile global markets. Yet in practice, RMB usage has expanded more visibly through offshore financial activity. This underscores the structural limits of a trade-driven strategy, particularly in the absence of capital account liberalisation and given the currency’s limited uptake even within Asia.

China’s RMB internationalisation strategy is often misjudged based on its modest share of global reserves and payments. But for China, success does not require dethroning the dollar. Rather, it prefers a multipolar currency landscape in which financial flows are less dependent on any single issuer. China’s bottom line is the ability to settle critical transactions in energy, infrastructure and digital services, without excessive exposure to dollar-based risks. The RMB’s selective uptake is not a limitation, but a by-product of China’s risk-conscious approach to internationalisation. It gives China room to manoeuvre within an increasingly divided and uncertain economic order.

The RMB is central to China’s economic diplomacy, supporting efforts to expand its role in global trade and finance through the Belt and Road Initiative, cross-border e-commerce platforms and BRICS cooperation. This signals a vision of future cross-border exchange that is more regionally embedded, technologically innovative and strategically motivated.

This is already visible in the expanding use of China’s Cross-Border Interbank Payment System, which has gained prominence as Russia, under heavy Western sanctions, has sharply increased its RMB-denominated trade. While not creating a new global financial order, these shifts are already reshaping parts of the existing one, particularly as China accelerates trade and financial cooperation beyond dollar-dominated institutions amid geopolitical uncertainty and the renewed unpredictability of the Trump presidency.

Rather than pursuing broad global uptake, China has concentrated on expanding the RMB’s role in specific domains where conditions favour its use, like trade, energy and infrastructure finance. These efforts do not reflect a grand design but rather a flexible process shaped by geopolitical constraints, one that leans less towards a genuinely multipolar order than towards a fragmented, domain-specific financial architecture parallel to the dollar-based systems. RMB internationalisation reflects this emerging orientation — not as a challenge to the dollar’s dominance, but as an effort to build resilience, deepen regional ties and assert autonomy in a contested global order.

Monique Taylor is University Lecturer in World Politics at the University of Helsinki, Finland.

Source: https://eastasiaforum.org/2025/05/26/rethinking-chinas-renminbi-strategy-in-a-fragmenting-global-economy/