dailyfriend.co.za May 10, 2026

The Chinese renminbi is unlikely to become globally dominant

OPINIONS 

• BARRY D. WOOD
•  MAY 10, 2026

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On 29 April, outgoing Federal Reserve chairman Jerome Powell warned that political interference put at risk the central bank’s ability to pursue independent monetary policy, which he labeled as one of the reasons “why the US economy is the envy of the world”. 

Central bank independence, Powell continued, was an essential part of the institutional architecture that separated successful economies from unsuccessful ones.

China by any measure is a successful economy but it does not have an independent central bank.

There is no situation in which the Peoples’ Bank of China complains about political interference. Neither does the Chinese yuan or renminbi (RMB) meet other requirements for global dominance. China doesn’t have deep and liquid capital markets. Its currency is not freely convertible, nor is its exchange rate determined by market forces.

Importantly, rule of law in China falls far short of international standards. For these and other reasons the renminbi is unlikely to supplant the US dollar as the world’s dominant currency.

President Xi Jinping says China’s drive to play a bigger role in the world economy requires having a powerful renminbi used in trade and held as official reserves. This effort to internationalise the renminbi began in 2015 when China created CIPS, the cross border international payments system. ­It was set up to rival the European-based Swift messaging service for clearing trade transactions. Unlike Swift, CIPS actually settles payments, moving funds among over 1,500 participating entities. 

Impressive growth

Ten years on CIPS has shown impressive growth. It is used mostly in financing China’s belt and road initiative and among the BRICS grouping of developing countries.

Also, in 2015 China led in creating the $100 billion CRA, the contingency reserve arrangement, in which short-term currency swaps are made available to BRICS members. Its membership recently expanded, the BRICS acronym identifies earlier participants—Brazil, Russia, India, China and South Africa. China has a 40% voting share in the CRA while Brazil, Russia and India each have 18%. South Africa has 6%. Another BRICS component is the group’s New Development Bank, headquartered in Shanghai.

These initiatives are critical to boosting the renminbi and reducing global dependence on the US dollar. But the dollar remains the currency of choice, accounting for 58% of global reserves and 65% of world trade. The renminbi is used for only 2% of global commerce.

Reflecting growing dissatisfaction with US financial dominance, CIPS usage has registered steady growth. Transaction volume was up over 10% in 2025 and by a stunning 43% in 2024. But despite these gains CIPS is way behind Swift and its partner for settling transactions. In 2025 $26 trillion transactions were processed through CIPS compared to $526 trillion through the Swift partner, the clearing house interbank payments system. And even though an increasing volume of Chinese exports is denominated in renminbi, China researcher Martin Chorzempa at Washington’s Peterson Institute for International Economics says 72% of Chinese trade is not denominated in renminbi.

Optimistic

Harvard University’s Kenneth Rogoff is among those who are optimistic about the renminbi. A former chief economist at the International Monetary Fund, Rogoff predicts that the renminbi will become a global currency within five years. The renminbi will first become dominant in Asia as countries in the region align their policies with China, their biggest trading partner. Rogoff blames a runaway US fiscal deficit and overall indebtedness for weakening confidence in the dollar.

In a multipolar world, Rogoff says it is natural that countries seek to diversify their reserve holdings.

China and the United States are mirror opposites. China has become the world’s dominant industrial power and its trade surplus is the largest ever recorded. By contrast, the US runs a chronic trade deficit.

But despite America’s financial shortcomings, there is little evidence that countries prefer the euro or the renminbi over the dollar. In summary, until the renminbi is freely traded and China opens its closed financial markets, the dollar is likely to remain dominant because there are no viable alternatives.

The views of the writer are not necessarily the views of the Daily Friend or the IRR.