<p>For decades, the dollar has comprised the bulk of flows through global financial plumbing. Oil was priced in dollars, trade was settled in it and central banks stored it. Firms borrowed the greenback, as markets offered numerous hedging instruments to balance risk. The yuan, by contrast, was mostly a domestic currency, important nevertheless because China was important, but not yet trusted as global money. That is now changing. The yuan is not about to replace the dollar, but it is becoming more acceptable as a medium of exchange, especially in trade linked to China. In December 2025, it was the sixth most-used currency for global payments on SWIFT, with a 2.73% share. More strikingly, it has become the second-largest currency in global trade finance, though still far behind the dollar. China’s own cross-border payment system, CIPS, has also grown abruptly with its annual business volume reaching RMB 180 tn in 2025.</p><p>This expansion is not accidental. Beijing has spent years building the infrastructure for a yuan world. CIPS gives banks a way to settle yuan transactions outside the traditional dollar-centred system. China has also pushed digital payments, including the e-CNY and the m-Bridge platform, which has processed more than USD 55bn in transactions, mostly in digital yuan. A recent article in The Economist, notes that more than 5,000 merchants in Hong Kong already accept the e-CNY, even if volumes remain modest. The other Chinese lever is finance. Because China’s economy is weak and domestic demand subdued, interest rates are low. That makes yuan borrowing attractive. Foreign governments and companies have issued “panda bonds” in mainland China and “dim sum bonds” in Hong Kong. Indonesia raised more than RMB 9bn in Hong Kong in February 2026 and Portugal became the first euro-area government to issue a dim sum bond.</p><p>There is also a store-of-value argument. The yuan is managed against a basket of currencies, not simply left to sway wildly against the dollar. The CFETS yuan index stood at 97.99 at the end of December 2025 and around 100.87 in March 2026, suggesting relative stability against a trade-weighted basket. That matters as a currency used for trade must not only be available, it must also feel predictable. Beijing’s capital controls, often criticised by investors, also help dampen volatility. The dollar, meanwhile, has lost some of its shine as America has used sanctions aggressively. Russian banks were pushed out of SWIFT after the invasion of Ukraine. Many countries now ask themselves if this could this happen to us one day? Yet the dollar remains formidable. It still dominates global reserves, debt markets and trade finance. Its strength lies not only in trust, but in abundance. There are simply vast quantities of dollars, dollar assets and dollar funding available. No other currency offers such depth.</p><p>India’s position is delicate. News reports suggested that Indian refiners began paying for some Russian oil in yuan in 2023, as sanctions made dollar settlement harder. But state refiners later stopped, partly because New Delhi was uncomfortable using China’s currency amid India-China tensions. Private refiners, however, have reportedly continued some yuan payments. In 2025, traders again sought yuan settlement from Indian state buyers of Russian oil. For Indian businesses, the message is not that the yuan will replace the dollar. It is that the currency map is becoming complicated. Firms importing from China may increasingly be asked to settle in yuan. Treasury teams will need to understand yuan liquidity, hedging costs and settlement channels. They must also watch the policy signals from New Delhi, because using yuan is not just a financial decision, it can carry strategic sensitivities.</p><p>Countries and companies are not abandoning the dollar. They are building alternatives in case the dollar system becomes expensive, politicised or unavailable.</p>
<p>For decades, the dollar has comprised the bulk of flows through global financial plumbing. Oil was priced in dollars, trade was settled in it and central banks stored it. Firms borrowed the greenback, as markets offered numerous hedging instruments to balance risk. The yuan, by contrast, was mostly a domestic currency, important nevertheless because China was important, but not yet trusted as global money. That is now changing. The yuan is not about to replace the dollar, but it is becoming more acceptable as a medium of exchange, especially in trade linked to China. In December 2025, it was the sixth most-used currency for global payments on SWIFT, with a 2.73% share. More strikingly, it has become the second-largest currency in global trade finance, though still far behind the dollar. China’s own cross-border payment system, CIPS, has also grown abruptly with its annual business volume reaching RMB 180 tn in 2025.</p><p>This expansion is not accidental. Beijing has spent years building the infrastructure for a yuan world. CIPS gives banks a way to settle yuan transactions outside the traditional dollar-centred system. China has also pushed digital payments, including the e-CNY and the m-Bridge platform, which has processed more than USD 55bn in transactions, mostly in digital yuan. A recent article in The Economist, notes that more than 5,000 merchants in Hong Kong already accept the e-CNY, even if volumes remain modest. The other Chinese lever is finance. Because China’s economy is weak and domestic demand subdued, interest rates are low. That makes yuan borrowing attractive. Foreign governments and companies have issued “panda bonds” in mainland China and “dim sum bonds” in Hong Kong. Indonesia raised more than RMB 9bn in Hong Kong in February 2026 and Portugal became the first euro-area government to issue a dim sum bond.</p><p>There is also a store-of-value argument. The yuan is managed against a basket of currencies, not simply left to sway wildly against the dollar. The CFETS yuan index stood at 97.99 at the end of December 2025 and around 100.87 in March 2026, suggesting relative stability against a trade-weighted basket. That matters as a currency used for trade must not only be available, it must also feel predictable. Beijing’s capital controls, often criticised by investors, also help dampen volatility. The dollar, meanwhile, has lost some of its shine as America has used sanctions aggressively. Russian banks were pushed out of SWIFT after the invasion of Ukraine. Many countries now ask themselves if this could this happen to us one day? Yet the dollar remains formidable. It still dominates global reserves, debt markets and trade finance. Its strength lies not only in trust, but in abundance. There are simply vast quantities of dollars, dollar assets and dollar funding available. No other currency offers such depth.</p><p>India’s position is delicate. News reports suggested that Indian refiners began paying for some Russian oil in yuan in 2023, as sanctions made dollar settlement harder. But state refiners later stopped, partly because New Delhi was uncomfortable using China’s currency amid India-China tensions. Private refiners, however, have reportedly continued some yuan payments. In 2025, traders again sought yuan settlement from Indian state buyers of Russian oil. For Indian businesses, the message is not that the yuan will replace the dollar. It is that the currency map is becoming complicated. Firms importing from China may increasingly be asked to settle in yuan. Treasury teams will need to understand yuan liquidity, hedging costs and settlement channels. They must also watch the policy signals from New Delhi, because using yuan is not just a financial decision, it can carry strategic sensitivities.</p><p>Countries and companies are not abandoning the dollar. They are building alternatives in case the dollar system becomes expensive, politicised or unavailable.</p>
