China Challenges Dollar Dominance Like Never Before

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China’s dedollarization efforts have grown much faster than anticipated

Bullion.Directory precious metals analysis 19 September, 2025
By Peter Reagan
Financial Market Strategist at Birch Gold Group

This is the sort of conflict that’s easy to overlook. Today, I’m going to explain exactly how and why this is a story we cannot afford to ignore…

Why China’s currency push matters here at home

You’re probably already aware that the U.S. dollar has had its worst start to a year since 1973. That made headlines worldwide.

Now, the U.S. has been the world’s reserve currency for decades meaning that the dollar has been, essentially, the yardstick by which other currencies are measured. A decline in the dollar’s value is bad news for everyone who gets paid in dollars, who saves in or pays with dollars.

Many factors can affect a currency’s value: Inflation, like we’ve seen over the last five years. Dollar supply and demand have a major impact as well. When the global reserve currency decreases in value significantly when compared with other currencies, it means simply that other currencies (the euro, the yen, the yuan and so on) are holding their purchasing power better than the dollar.

A “weaker dollar” means imports cost more for Americans. It also means that exports to other countries could be less profitable.

Currencies fluctuate in value from day to day, though. Usually it’s not an issue to get worked up about. This time is different, though, for two reasons.

First, the currency that’s doing so poorly is also the global reserve currency. That means every other nation that owns dollars is losing, just like the rest of us.

Second, this situation makes the dollar less compelling as a store of value. Which opens the door to challengers…

China weaponizing recent dollar declines

The Economist recently reported on developments I found quite shocking:

…China’s tightly controlled currency, the yuan, has reached its highest level since Mr. Trump was re-elected in November. Foreign investors are piling in. So are many governments looking for dollar alternatives.

For decades, the People’s Bank of China (PBoC) tightly controlled the yuan’s value. That’s the logic behind Treasury Secretary Steven Mnuchin’s labeling of China as a “currency manipulator” in 2019, during the first Trump presidency. China actively suppressed the yuan’s value, which kept Chinese exports cheap worldwide.

That was then. Today, the PBoC has a different goal. The yuan has reached its highest value since the election in November. Foreign investors are piling in (along with governments seeking dollar alternatives).

China’s ultimate goal is to increase their global influence. Along the way, China has been eager to replace the dollar as the world’s reserve currency. The trade agreements and “friendlier” relations with countries on multiple continents including other Asian countries, African countries, Latin American countries, and (maybe especially) Russia are evidence of their efforts on this front.

Russia offers a clear case study of how geopolitics drives dedollarization. After European sanctions limited Russia’s access to Western markets, Moscow turned toward Beijing. In response, China gained greater access to Russian energy supplies and demonstrated how cross‑border deals could be conducted outside of dollar channels. These developments highlight how political alliances can accelerate financial realignment.

That’s just the trade side of things

China is also building dollarless alternative markets and partnerships, deepening the yuan’s role in global trade.

And the effort doesn’t stop there: Beijing is pushing financial reforms designed to encourage greater international use of its currency. According to The Economist, regulators recently instructed major banks to conduct at least 40% of international lending in yuan.

Chart via The Economist

For good reasons! The goal here is to increase circulation and normalize use of the yuan for international transactions. Lending in yuan means the borrower has to spend in yuan, too. The more loans made in yuan, the more yuan will be spent – creating a positive feedback loop for China’s economic agenda.

In addition to all this trade and commercial lending, China has taken steps to serve a role as “lender of last resort,” just like the Federal Reserve did during the Great Financial Crisis.

The PBoC has offered 4.5 trillion yuan in emergency “swap lines” to 32 central banks worldwide. That’s as big as the International Monetary Fund’s emergency lending facilities – again, totally separate from Western institutions.

Listen: It’s easy to offer emergency assistance, especially during relatively peaceful times. China wants to send a message to other nations: “You can count on us, and the yuan, in a crisis.”

Explosive growth in China’s SWIFT alternative 

CIPS, the Cross‑Border Interbank Payment System, functions as China’s answer to SWIFT. (You might remember that SWIFT was the tool that allowed Biden to weaponize the dollar against Russia back in 2022.)

CIPS allows institutions worldwide to transact directly in yuan, reducing reliance on both SWIFT and the dollar.

I’m honestly shocked by the explosive growth CIPS has seen. Over 1,700 banks have joined, and transaction volumes grew 43% last year to $24 trillion. CIPS-connected banks are doing business in 30+ countries, including NATO member Turkey and the incredibly wealthy United Arab Emirates. Every single transaction is completely firewalled from Western oversight and interference.

Despite this rapid growth, the yuan remains far from displacing the dollar right now. Today the yuan accounts for just 4% of international payments and only 2% of global reserves. That’s mostly a byproduct of China’s historically tight control over the yuan. That’s changing. Considering that CIPS transactions bypass SWIFT completely, official statistics probably underestimate the yuan’s true reach.

Losing that sort of data is just another aspect of the dedollarization trend. The more other nations flee the dollar for trade or reserves, the less we actually know about the rest of the world’s financial busines…

I want you to understand something: This is more than a matter of global trade and central bankers shaking hands. The dollar is our nation’s #1 export – and has been for decades. That means every container of goods shipped overseas, every loan extended in dollars, every foreign government holding U.S. currency is part of the same system. If confidence in the dollar fades, it isn’t just abstract policy that suffers – it’s the purchasing power of ordinary Americans. From groceries to gas, the ripple effects always circle back home…

Why this matters to you and me

See, in a world where currencies have no intrinsic value, they’re not backed by anything. That means their value is based on supply and demand – that’s all! Print too much currency, its value goes down. The world suddenly decides there’s a more stable alternative to the dollar? Then dollar demand declines – and dollar purchasing power follows.

But if you’re paid in dollars and shop in dollars, global currency shifts hit home. Everyday imports – like bananas from Latin America or coffee beans from abroad – cost more when the dollar weakens. For American families, that means thinner wallets at the grocery store and higher costs of living.

You do have a way to protect yourself from this problem, though, regardless of what happens to the U.S. dollar or the yuan.

By swapping some of your dollars for one of the world’s oldest currencies, a currency that has maintained its real world purchasing power over centuries across countries and cultures.

I’m talking about gold – real, physical gold. You can start your journey into protecting yourself and your family by owning precious metals by getting our free 2025 Precious Metals Information Kit.

This article was originally published here

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