Xi Jinping Calls for Yuan to Challenge Dollar Dominance
On February 1, 2026, Chinese President Xi Jinping reinforced his strategic vision for the yuan to become a global reserve currency. This call, originally expressed in 2024, was officially published in the Communist Party’s journal, Qiushi. Xi’s announcement emphasizes the need for robust financial infrastructure to support the internationalization of the renminbi (RMB), aiming to reduce the global dependency on the US dollar ($USD).
Yuan’s Current Market Position
The People’s Bank of China (PBOC) has shown a willingness to let the yuan appreciate, setting the strongest reference rate in almost three years at 6.9929 per USD. This move follows a 1% appreciation over the past month, indicating strategic tolerance for a stronger currency.
Despite these efforts, the yuan’s presence in global reserves remains limited. As of Q3 2025, the RMB accounted for just 1.93% of global reserves, compared to the US dollar’s 57% and the euro’s 20%. However, the yuan’s role in global trade is expanding, with over 50% of China’s trade settlements conducted in RMB by March 2025.
Strategic Developments and Policy Initiatives
China’s 15th Five-Year Plan (2026–2030) prioritizes the internationalization of the yuan. This includes capital market liberalization, expanding RMB financing options, and developing digital currency capabilities. The PBOC has also been promoting the use of panda bonds and offshore RMB bonds to increase the yuan’s global reach.
Parallel to the physical currency initiatives, China is advancing its digital RMB (e-CNY), which had a domestic transaction volume of 7.3 trillion yuan in mid-2025. This digital push could eventually extend to cross-border systems, reinforcing the RMB’s international presence.
Challenges and Opportunities
Experts highlight significant challenges in achieving reserve currency status for the yuan. These include capital controls, incomplete currency convertibility, and trust issues in China’s financial governance. Goldman Sachs notes that while the yuan may be undervalued by approximately 25% against the USD, cautious appreciation is necessary to maintain export competitiveness.
The global financial landscape is shifting towards a multipolar currency system, with increasing interest in currencies like the euro and yen. This trend presents an opportunity for the RMB to gain ground as a viable alternative to the dollar. Pan Gongsheng, PBOC Governor, advocates for a system where multiple currencies coexist to balance global economic power.
Implications for the Global Economy
Xi Jinping’s call for a stronger yuan is a symbolic milestone in China’s long-term strategy to reshape the international financial order. While immediate shifts in global reserve currency structures are unlikely, the groundwork for the RMB’s internationalization is being laid. This includes modest currency appreciation, expanded trade usage, market openings for foreign investors, and digital infrastructure development.
Ultimately, China’s ambitions for the yuan reflect a broader geopolitical strategy to challenge the dollar’s dominance and position itself as a central player in the global economy. As the RMB’s role grows, it could lead to a more balanced and multipolar economic landscape.
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