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China's Accelerating Efforts to Internationalize the Renminbi

China's Accelerating Efforts to Internationalize the Renminbi

The Diplomata day ago
In recent weeks, a cluster of news reports and commentary has drawn attention to China's accelerating efforts to internationalize the renminbi (RMB). At the Lujiazui Forum in Shanghai, The New York Times reported that People's Bank of China governor Pan Gongsheng delivered a pointed critique of global dependence on a single national currency, warning that financial risks stemming from the dominant issuer could spill over internationally and trigger crises. Without naming the United States, Pan called for a more diversified global monetary system and promoted China's digital RMB as part of the solution. According to this framing, China's current push to expand the RMB's global role is a strategic response to the vulnerabilities of dollar dependence, rather than a direct challenge to dollar hegemony.
In the Financial Times, economist Gerard Lyons argued that Beijing should consider allowing a gradual appreciation of the RMB to support its international ambitions. Meanwhile, The Straits Times reported that Chinese authorities have launched a sweeping campaign to elevate the currency's role in global finance, including the expansion of China's Cross-Border Interbank Payment System (CIPS) to offshore RMB centers in Africa, the Middle East, and Central Asia, and plans to establish a digital RMB international operations center in Shanghai.
This renewed focus on the global role of RMB – by both Beijing and international observers – is propelled by rising geopolitical volatility and waning confidence in U.S. monetary stewardship. These shifting conditions have not altered the direction of policy, but have reinforced and accelerated Beijing's broader, long-term strategy to reduce its reliance on the dollar and institutionalize an alternative ecosystem of trade, payments, and finance – one designed to operate alongside, rather than displace, the dominant dollar-based order. Beijing's goal is to carve out strategic space for the RMB within an increasingly fractured global system. In this emerging configuration, the RMB assumes a more prominent, though still bounded, role.
A State-led Strategy of Internationalization
While China is attempting to seize a strategic opening to accelerate the internationalization of the RMB, it is important to note that Beijing is not pursuing a zero-sum game against the greenback. The more revealing metric is not whether the RMB overtakes the dollar, but how successfully China is building functional alternatives, particularly in trade, finance, energy, infrastructure, and digital payments, that reduce its systemic exposure to dollar-based risks. Judging RMB progress solely by global reserve status or through the lens of dollar hegemony obscures the pragmatic, domain-specific architecture now taking shape.
Since the late 2000s, Beijing has pursued a cautious, state-managed campaign to expand the RMB's role in global trade and finance. These efforts gained traction in the aftermath of the 2008 Global Financial Crisis and again during the China-U.S. trade war. Key milestones include the establishment of CIPS, the introduction of yuan-denominated oil futures ('petroyuan'), and the inclusion of the RMB in the International Monetary Fund's Special Drawing Rights basket.
However, China's RMB internationalization strategy is not a direct progression toward achieving significant global reserve currency status (currently the RMB accounts for only 2-3 percent of global reserves), as this would entail extensive financial liberalization. China has avoided liberalizing its capital account or floating its exchange rate. RMB internationalization remained a means to an end – a way to hedge against geopolitical risk and strengthen China's global economic position without exposing itself to the volatility of open financial markets.
What has changed in 2025 is not China's strategy per se, but the context in which it operates. With U.S. economic policy increasingly erratic, and dollar-based systems increasingly seen as instruments of geopolitical coercion – frequently deployed to sanction adversaries – Beijing perceives a window of opportunity. Recent developments – including new cross-border infrastructure, digital currency pilots, and offshore RMB market instruments – signal a potential turning point. Together, these measures lay the groundwork for broader RMB adoption by strengthening the institutional infrastructure underpinning its international use.
At the same time, some observers have suggested that currency appreciation would be a more direct route to enhancing the RMB's credibility and global uptake. Lyons argued that a stronger RMB, supported by domestic policy reforms, could help anchor China's long-term ambitions for a more prominent international role. But such a move would risk undermining export competitiveness and exacerbating deflationary pressures at home, potentially harming economic growth. Rather than pursuing exchange-rate adjustments to boost the RMB's global standing, Beijing continues to prioritize institutional mechanisms that preserve domestic stability and policy autonomy.
Selective Integration Over Liberalization
A key feature of China's approach is its continued refusal to pursue full capital account liberalization. While some incremental easing of capital controls has occurred in recent years – notably through expanded investment quotas and a broader array of offshore RMB product offerings – the underlying architecture remains tightly managed. Instead of opening up, Beijing is cultivating a system of selective internationalization: integrating into global financial markets on its own terms, in a way that preserves domestic stability and control.
Hong Kong remains the linchpin of this strategy. Its semi-autonomous status under the 'one country, two systems' framework allows for controlled experimentation in cross-border financial innovation. The city's introduction of RMB-denominated stock trading counters and its growing role in digital e-CNY ('digital yuan') initiatives that enhance connectivity between the mainland and international payments infrastructure underscore its centrality. Yet even here, China is carefully calibrating exposure to risk.
This strategy reflects a broader understanding of global economic fragmentation. Rather than chasing global dominance, China is building a network of bilateral and regional arrangements that reduce dependence on dollar-based systems. From the Belt and Road Initiative to BRICS+ and currency swaps, China is embedding the RMB in a growing network of cross-border arrangements – facilitating trade and investment while maintaining control over capital flows.
Building Systemic Resilience
The unifying logic to this evolving strategy is building systemic resilience. For China, being able to settle critical transactions in its own currency is not just economically advantageous, but strategically necessary. As the global economic order becomes more contested and less rules-based, the ability to operate outside Western-controlled systems becomes a matter of national security.
This logic also appeals to China's partners. In a world of growing financial polarization, the RMB is gaining traction not because it offers a superior alternative to the dollar, but because it offers a means of reducing exposure to U.S. policy volatility. For countries under financial sanctions, or those wary of dollar dependence, access to RMB-denominated channels offers a vital hedge.
While China has been pursuing trade-based RMB internationalization – using bilateral settlements, currency swap agreements, energy transactions, and strategic partnerships to reduce reliance on the dollar without liberalizing its capital account – recent developments mark a turn toward financial market infrastructure. This shift reflects a strategy to embed the RMB more deeply in the global financial system, not merely as a medium for trade, but as part of a broader institutional architecture.
Among the key measures are the establishment of a digital RMB international operations center in Shanghai, designed to promote cross-border adoption of China's central bank digital currency by streamlining transactions and reducing dependence on dollar-based systems. The rollout of a fast payment system linking Hong Kong and the mainland facilitates real-time RMB transfers for trade and services, increasing usability in cross-border commerce. In May 2025, the Shanghai Futures Exchange proposed opening domestic currency futures to overseas investors and brokers, offering onshore tools to hedge RMB exposure and supporting further financial liberalization.
Meanwhile, the expansion of CIPS to offshore centers in Africa, the Middle East, and Central Asia reinforces China's push to build an alternative to SWIFT and extend the RMB's reach across emerging financial corridors in the Global South. In June 2025, CIPS also launched a pilot service for processing international letters of credit, expanding its functionality in trade finance and further reducing reliance on Western-dominated financial intermediaries. Taken together, these initiatives point to a more finance-oriented phase of RMB internationalization – less about transactional trade flows, and more about embedding the RMB in the architecture of a parallel monetary order.
Toward a Multipolar Currency Order
What we are witnessing in 2025 is not a radical challenge to the prevailing currency system, but the construction of a parallel one – intended not to displace the dollar, but to reduce exposure to it. China is leveraging global uncertainty to accelerate a model of selective internationalization it has long been developing. This model does not aim to overturn the existing monetary order, but to insulate China and its partners from its volatility and to expand China's influence in targeted domains. It does not seek to replace one global financial hegemon with another, but to mitigate the risks of reliance on the existing one. Rather, RMB internationalization is incremental but accelerating – a recalibration of risk, reach, and the rules of global finance.
This work has received funding from the European Union's Horizon Europe coordination and support action 101079069 — EUVIP — HORIZON-WIDERA-2021-ACCESS-03. Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the granting authority can be held responsible for them.
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