In 1971, as the international monetary system was on the brink of collapse, U.S. Treasury Secretary John Connally told a group of worried European finance ministers that the dollar was “our currency, but your problem.” The dollar had become that system’s official reserve currency in 1944, under the Bretton Woods agreement, making signatories subject to the whims of U.S. monetary policy. Even after Bretton Woods collapsed and many currencies floated freely, the dollar continued to dominate. In the last half century, U.S. currency power has only expanded, as more countries have integrated into the global economy and therefore grown to depend on the dollar. China, reliant on export-driven growth, is foremost among them.
Reckoning with the possibility that Washington could someday make the dollar China’s problem, Beijing is now crafting its own solution. In a January 2024 speech, Chinese leader Xi Jinping made this effort explicit, instructing senior provincial and ministerial officials to accelerate China’s transformation into a “leading financial power.” A strong currency, he specified, was one of the essential foundations of that power. When Qiushi, the Chinese Communist Party’s flagship journal, published the full text of the speech in 2026, the standard Xi had in mind became clearer: for a currency to be considered “strong,” it must be widely used in international trade, investment, and foreign exchange markets and be recognized as a global reserve currency.
Xi’s call is the latest episode in a long history of efforts by major powers to reduce their dependence on the dollar-centered global financial system. In 1965, French Finance Minister Valéry Giscard d’Estaing famously described the disproportionate advantages that dollar dominance confers on the United States as “exorbitant privilege”; the same year, France began aggressively converting a substantial share of its dollar reserves into gold, contributing to the collapse of the Bretton Woods system. In 1999, the Japanese government released a report on how to promote wider international use of the yen. That same year, the launch of the euro gave Europe what would become the world’s second most important international currency, affording it greater monetary autonomy even as the European Central Bank carefully danced around any suggestion that it might challenge the dollar.
What distinguishes Xi’s ambition is that China, unlike Europe or Japan, possesses the economic heft, military capability, and political will to rival the United States’ geopolitical power. Not since London commanded a global empire has another country’s currency stood a realistic chance of competing with the dollar. A global financial transition from “In God We Trust” to “Where the Party Leads, We Follow” can no longer be dismissed as fantasy.
The internationalization of the renminbi would afford China a measure of financial survivability should the United States ever choose to wield the dollar as a punitive weapon, as it did against Russia after the country’s full-scale invasion of Ukraine, in 2022. The United States controls both the supply of the dominant global reserve currency and many of the critical financial infrastructure chokepoints through which it circulates. Washington, if it so desired, could severely restrict China’s access to dollar liquidity by making the cost of doing business with Chinese institutions prohibitive, for example by indicting or sanctioning a major Chinese bank. Any such measure would shock the Chinese financial system, raise transaction costs for trade, and deliver a major competitive blow to China’s export sector, which accounts for roughly one-fifth of its GDP.
Survivability, however, is only a prerequisite for credible deterrence. To deter the United States from using the dollar weapon, Beijing requires a financial second-strike capability. It must be able to redirect a substantial share of global trade and finance to a renminbi-based network. The durability of that shift depends on healthy global demand for an anchor asset priced in renminbi. For China, the most likely source of such an anchor asset lies in its dominance of the green economy.
Xi does not necessarily want the renminbi to replace the dollar. His 2024 speech advocated strength, not hegemony. Placing a respectable second, or even a consequential third, would suffice to break the dollar’s effective monopoly and constrain the United States’ ability to impose financial sanctions unilaterally, while saving China the effort and cost of sustaining currency supremacy. From Beijing’s perspective, the mission is to establish the renminbi as the Pepsi to the dollar’s Coca-Cola: never the market leader, but serviceable in a pinch and more than capable of keeping the dominant incumbent honest.
SECOND IS THE BEST
The near-universal acceptance of the U.S. dollar arguably benefits China more than any other country. The Chinese economy relies on exports, and Chinese goods priced and financed in dollars can reach ready buyers almost anywhere. The resulting profits can then be invested almost anywhere and converted into liquid funds on short notice. This suits Beijing: China enjoys the benefits of global liquidity without bearing the burdens of sustaining it. To preserve the global dollar system, the United States must tolerate foreign ownership of an ever-expanding volume of dollar claims as countries conduct ever more business in the currency. U.S. markets are exposed to international volatility, and foreigners hold some influence over U.S. corporations. The Federal Reserve, which issues the dollar, backstops the system, expanding its balance sheet during periods of financial stress, when governments and private companies hoard dollars to ensure they can continue to pay their debts and buy goods. This openness and exposure has posed little threat to the U.S. economy because foreign shareholders have generally sought to operate within, rather than change, U.S. business norms, and U.S. banks have earned tidy profits intermediating the world’s capital flows through New York and London.
China’s leaders have no desire to make any such tradeoff. Maintaining a global renminbi system would be fundamentally at odds with China’s state-led economic model. For the renminbi to replicate the dollar’s functions, China would have to create broad, two-way financial channels through which foreign holders of renminbi could reinvest that money into the Chinese economy. The resulting capital inflows would fundamentally reshape China’s domestic financial markets. It would be impractical for Beijing to confine foreign investors to a narrow group of approved assets, as it does now. Once foreign investors were allowed into China’s markets in force, they would arbitrage the distortions created by financial repression and politically directed capital allocation. Such competition would undermine one of Beijing’s most effective means of securing the loyalty of China’s business class: controlling who gains access to capital, on what terms, and for what purposes.
For many wealthy Chinese citizens, including some members of the Communist Party itself, the dollar is an indispensable form of political risk insurance. Domestic political rivalries can lead to asset seizure or even imprisonment with little due process. Offshore dollar deposits and foreign corporate structures allow elites to diversify their holdings across currencies and jurisdictions. Control of a company listed overseas, especially in the United States, offers wealthy Chinese more than prestige and access to global capital; disclosure obligations, duties to shareholders, and international visibility, which extend beyond the party’s control, can give Chinese executives leverage against arbitrary demands from officials at home. These constraints cannot prevent interference by senior authorities determined to pursue their targets, but they can raise its cost, slow its implementation, and create room for negotiation. The dollar-based system is a refuge for Chinese elites who fall from grace, and because no one’s position is ever entirely secure, few wish to see that refuge disappear.
USE IT OR LOSE IT
China is perfectly willing to go on living in a world that the dollar makes go round. But it cannot abide the dollar’s weaponization, and the renminbi still has a long way to go before it is strong enough to blunt that threat. If more countries and businesses are to adopt the renminbi, there must first be a global financial infrastructure for its use. China has already laid the foundation by facilitating renminbi use among firms in more than a hundred countries and across a growing array of commodity markets to settle transactions, obtain financing for trade and investment, and hedge their risks. Here, breadth matters far more than depth. Even modest daily volumes of renminbi transactions can keep payment channels operational, preserve financial relationships, and maintain the legal and administrative expertise needed to run an alternative financial system.
Beijing requires a financial second-strike capability.
Because China’s relative economic strength lies in the flow of manufactured goods—it accounted for 20 percent of global manufactured exports in 2025—Beijing has concentrated its efforts on building a payment network that facilitates the commercial flows generated by its manufacturing machine. In 2005, Zhou Xiaochuan, then governor of the People’s Bank of China, publicly encouraged the already increasing use of local currencies among China’s trading partners. In 2009, the PBOC launched a pilot program for settling cross-border transactions in renminbi, followed in 2015 by the creation of the Cross-Border Interbank Payment System, the backbone of China’s international renminbi network. CIPS began with 195 participants spanning 50 countries; by June 2026, it had 1,829 participants and could route payments to more than 5,200 banking institutions in 191 countries. But CIPS remains much smaller than the mature wholesale payment systems supporting the dollar and the euro. In 2025, the U.S.-based Clearing House Interbank Payments System processed an estimated 19 times as much value in international payments as CIPS, and Europe’s real-time gross settlement system, called T2, cleared about 14 times as much.
But payments alone are a misleading measure of currency power. An international transaction entails far more than a transfer of economic value; it requires a package of financial services that unfolds across five linked stages: pricing, financing, risk transfer, payment, and reinvestment. The dollar dominates international trade and finance because it is the default currency at every stage, with its strength in each reinforcing its position in all the others. For the renminbi to supplant the dollar, it would have to become competitive at every stage of the transaction cycle, not just in payments.
China’s leaders recognize that the influence of financial centers in London, New York, and Tokyo rests not only on their ability to move money but also on their institutions’ ability to create credit, set prices, insure shipments, and recycle savings. That is why Chinese state-owned enterprises are driving the expansion of the renminbi network. By denominating invoices, contracts, and overseas project financing in renminbi, these enterprises create a base of recurring demand for the currency around which Chinese banks, insurers, and other financial institutions can build competing business lines under Chinese control. To reinforce that base, the Communist Party laid out an action plan in 2025 that instructs state-owned enterprises to prioritize settlement in renminbi, rather than dollars, whenever they deal with foreign suppliers and customers. That strategy is already fostering a regional network for renminbi use in Southeast Asia. In 2024, renminbi payments involving economies in the Association of Southeast Asian Nations rose 19 percent, with two-thirds of those transactions occurring between ASEAN countries.
the COST OF ENTRY
Beijing has largely completed the first phase of its strategy, establishing a foothold in payments, and it is now expanding upstream into pricing, financing, and risk transfer, and, cautiously, downstream into reinvestment. Only recently has Beijing begun to appreciate how much the currency in which goods are priced influences the subsequent stages of the transaction cycle. Historically, China has been content to price the goods it imports and exports mostly in dollars. According to International Monetary Fund (IMF) estimates, only 6.5 percent of China’s exports were invoiced in renminbi in 2023. Chinese government statistics show that nearly 30 percent of China’s trade in goods is settled in renminbi, but much of that is essentially a dollar transaction masquerading as a renminbi one: Chinese exporters invoice in dollars, buyers obtain dollar funding and are debited in dollars, and the funds are converted into renminbi only just before reaching the mainland.
The government is seeking to reverse that pattern by promoting what it calls “China prices”: renminbi-denominated benchmark prices listed on local exchanges for major commodities that China imports. Greater autonomy over pricing means that Chinese firms can buy raw inputs and manage their exposure to commodity price swings in global markets without acquiring dollars. It also gives Chinese authorities greater influence over the reference prices used to set the terms of supply contracts for the physical delivery of those commodities. This leverage is vital for China because the steady flow of raw inputs is essential to the smooth running of its manufacturing machine.
Price autonomy matters especially for critical minerals, which feed the green industries that in Xi’s view are central to China’s economic future. China produces more than 80 percent of the world’s batteries and consumes over 75 percent of its lithium, 70 percent of its cobalt, and about 60 percent of its nickel. But the country’s position in global markets for each of these minerals does not yet reflect its dominance in production and consumption. To date, China has made the most progress in lithium; more than 90 percent of global trading in lithium-carbonate futures occurs on the Guangzhou Futures Exchange, where contracts are denominated in renminbi. In July, the exchange allowed foreign traders to trade the lithium-carbonate futures contract directly, announcing with fanfare that several overseas “leading enterprises” had joined the market. China is now poised, perhaps for the first time in modern history, to become the principal financial center for a globally important commodity. Nickel and cobalt, on the other hand, remain tied to dollar benchmarks in London and Chicago. Although China is the largest consumer of these two minerals, it is not yet the financial reference point for their markets. That is the sort of mismatch that the push for China prices is meant to resolve.
The financing stage of Beijing’s renminbi strategy is gaining momentum. In 2023, Beijing instructed Chinese financial institutions to expand their renminbi funding abroad. State-backed lenders such as the Export-Import Bank of China have increased their renminbi lending for overseas trade and infrastructure projects, and commercial banks increasingly supply renminbi trade finance. Between 2023 and mid-2026, Chinese financial institutions more than doubled their renminbi lending to overseas borrowers from 1.3 to 2.9 trillion yuan ($428 billion). The PBOC, for its part, has adopted currency swap agreements with 32 foreign central banks and monetary authorities, including those in Saudi Arabia and the United Arab Emirates, as well as the European Central Bank. In their early years, after the global financial crisis, these swap lines were largely symbolic and only lightly used, but in recent years, some have provided direct support for commercial activity. In 2025, Turkish companies borrowed four billion yuan ($557 million) to pay Chinese suppliers using a facility backed by a PBOC swap line, 70 percent more than they had borrowed a year earlier. This effort to turn the renminbi into a funding currency is starting to gain traction: in May 2026, the renminbi accounted for seven percent of the value of trade-finance messages on SWIFT, the leading global platform for exchanging payment instructions, up from 5.1 percent two years earlier and enough to overtake the euro for second place, although the dollar remained leagues ahead with an 82.5 percent share.
Beijing has also taken steps, if more modest ones, to increase the renminbi’s presence in markets for insurance and reinsurance. In 2025, Bank of China, a state-owned bank, and PICC, a state-owned property and casualty insurance company, developed new terms under which premiums and claims for cargo shipments could be settled in renminbi. The terms also specified Shanghai as the preferred venue for arbitration, part of a broader effort to shift the maritime-insurance market away from its traditional reliance on dollar settlement and English commercial law, long the standard framework for international shipping and maritime insurance contracts.
The final stage of the transaction cycle, reinvestment, completes the loop through which goods and value circulate through the global economy. Recipients of payment must decide what to do with the proceeds: hold them in a short-term account, invest them in longer-term assets, or convert them into another currency. A strong currency ecosystem becomes sustainable at scale only when recipients are willing to hold and reinvest their balances rather than routinely convert them.
China is perfectly willing to live in a world that the dollar makes go round.
Beijing has, over the past decade, given foreign holders of renminbi more ways to reinvest their balances. The Stock Connect and Bond Connect programs, which took their earliest forms in 2014 and 2017, respectively, have since expanded to allow a much broader mix of investors outside China to use renminbi to buy some mainland equities and bonds. Before these programs began, licensing and quotas restricted direct access to Chinese markets, with only about 228 large institutional investors receiving quotas in 2013; today, about 1,000 investors have that status. In 2025, foreign trading through Stock Connect averaged 212 billion yuan ($29.5 billion) per day, and Bond Connect averaged 39 billion yuan ($5.4 billion) per day. The tools available to manage the risks associated with these investments have also expanded. Swap Connect, launched in 2023, allows offshore investors to hedge against movements in onshore renminbi interest rates.
Access to China’s financial markets is no longer the biggest problem facing foreign investors, but the risk that Beijing’s unpredictable capital controls could someday trap their funds remains a worry. A 2023 survey by the Insurance Asset Management Association of China and J.P. Morgan Asset Management found that roughly two-thirds of chief investment officers at insurance companies outside China cited controls on capital moving in and out of the country as a top concern for investing there. Despite greater access than ever, foreign investors remain reluctant to hold Chinese assets at scale. In March 2026, they held only 3.2 trillion yuan ($448 billion), or 1.6 percent of the Chinese bond market, compared with roughly $15.5 trillion, or 27 percent, of the U.S. bond market. Reserve holdings recorded with the IMF reveal an even wider gap: in the first quarter of 2026, the renminbi accounted for just under two percent of global foreign-exchange reserves, compared with 57 percent for the dollar. Without a far larger pool of renminbi assets that foreigners can freely buy and sell, the renminbi cannot come close to replacing the dollar.
GREEN STANDARD
For China to wield anything approaching the currency power of the United States, the renminbi must dominate trade in a good that China controls and the rest of the world cannot easily do without. In the dollar system, the global oil trade has long played this role—hence the term “petrodollar.” In a renminbi-ascendant system, the corresponding anchor could be the critical minerals, clean energy equipment, and electrical infrastructure that are central to green energy technology. If China consolidates its dominance over that industrial ecosystem, using its scale and cost advantages to prevent competitors from catching up, it could gain enough leverage to price those essential, hard-to-substitute exports in renminbi, creating the foundation for a “green yuan” that might eventually replace the petrodollar.
China has spent decades methodically assembling the supply chains that have made it the world’s dominant producer of green energy technology and equipment. Beijing is now on the verge of taking a commanding position across a set of goods that the world has decided it cannot do without. China’s strategy rests on vertical integration of nearly the entire clean energy supply chain. It is the leading refiner of 19 of the 20 energy-related strategic minerals tracked by the International Energy Agency, with an average market share of 70 percent. It accounts for roughly 85 percent of global solar panel manufacturing capacity, and it supplies 78 percent of the wind-turbine capacity installed worldwide. In 2025, it produced about 70 percent of the world’s electric vehicles.
After decisively seizing the first-mover advantage, Beijing is now consolidating its market position, using economies of scale to undercut prospective rivals and promote technical standards built around technologies owned by Chinese firms. The green energy economy is more diffuse than the fossil fuel system it seeks to replace and therefore more difficult to command. But China is already beginning to turn its market-share lead into structural advantages that could lock out competitors and entrench its dominance.
Until recently, Beijing focused more on extending its industrial lead in green energy than on converting that advantage into financial power. But that is beginning to change. The proliferation of carbon-neutral investment mandates has unintentionally created a green finance industry almost tailor-made for China. In 2022, Beijing published its “Green Bond Principles,” which require green bond issuers to allocate 100 percent of proceeds to eligible green projects.
By the end of 2025, funds dedicated to sustainable investment were worth $4.13 trillion worldwide, and assets managed according to sustainability criteria were projected to reach $40 trillion by 2030. Chinese entities, meanwhile, already had 47.2 trillion yuan ($6.7 trillion) in green loans and bonds outstanding, far exceeding any other country’s green lending, but largely confined to its domestic renminbi system. In 2024, foreign institutions held only 3.2 billion yuan ($445 million) of China’s 2.2 trillion yuan ($306 billion) green bond market, a minuscule 0.15 percent.
That meager foreign participation is likely to increase. Chinese authorities are working to turn more of the country’s vast pool of green debt—a term for loans and bonds issued for projects with a positive environmental impact—developed primarily for a domestic investor base, into tradable securities that foreign investors can hold in compliance with international sustainability mandates. Their objective is to create a broad class of renminbi-denominated assets that are internationally investable, tied to green projects, and integrated into the broader renminbi ecosystem for pricing, settlement, and other financial services.
About 17 percent of China’s green bond market has already been screened against technical criteria aligned with European green finance frameworks, making those bonds easier for foreign investors and index providers to recognize and include in their portfolios. The Ministry of Finance has begun issuing renminbi-denominated sovereign green bonds outside China, with its first bond issuance raising six billion yuan ($834 million) in London in April 2025, followed by a second six-billion-yuan issuance in Hong Kong this past May, where orders were ten times the amount on offer. These issues are tiny compared with China’s domestic market, but they establish pricing reference points that make it easier for other entities to issue renminbi-denominated green debt in the future. Pakistan’s issuance, in May, of a 1.75 billion yuan ($258 million) green Panda bond—the term for renminbi-denominated debt issued in China by foreign borrowers—offers a glimpse of a future in which foreign borrowers routinely raise renminbi in China to finance their green development.
Washington should consider whether the petrodollar is still fit for purpose.
This is how industrial dominance begins to grow into financial power. The Chinese government has no formal plans to create a green yuan, but the constituent pieces of such a system are nevertheless starting to come together. The anchor asset for a green yuan would not be green technology itself, but an expanding family of renminbi claims on the green economy. Green bonds would form this economy’s tradable core, connecting China’s industrial advantage to the growing global demand for sustainable assets.
Much of the world has set deadlines for replacing fossil fuels that cannot be met without China’s green economy. Even if the political will to combat climate change fades, global dependence on imported energy has created geopolitical vulnerabilities that will likely continue to buoy demand for renewables, which almost any country can deploy to produce more energy at home. For countries and firms seeking entry into the green economy, accepting renminbi financing and Chinese technical standards may eventually become part of the ordinary price of admission. The result would be a self-reinforcing circuit of green goods and green finance, much of it denominated in renminbi.
For Washington, the prospect of a green yuan should not set off alarms about an imminent renminbi takeover. It should instead prompt a harder question: whether the petrodollar is no longer fit for purpose and what asset class, technology, or industrial system might anchor the dollar’s currency power in the future. The dollar rests on far more than the United States’ ability to secure global energy flows and its ties with major oil-producing states, but policymakers would be mistaken to treat its supremacy as permanent.
WATCH THE THRONE
Beijing is not plotting to dethrone the dollar, and the Communist Party almost certainly does not want the financial openness such a victory would require. Whether or not the green yuan becomes a reality someday, the more immediate value to the party of an internationalized renminbi is its potential to deter China hawks in Washington from weaponizing China’s current reliance on the dollar.
As China’s renminbi-based system becomes stronger, so will Beijing’s ability to withstand the shock of potential U.S. financial sanctions. Washington’s threat to impose those sanctions will, in turn, lose some of its potency. That shift in the economic power dynamic would likely make Beijing more willing to call Washington’s bluff—which it may already be doing. In May, China issued its first-ever blocking order, instructing firms in China not to comply with U.S. sanctions on five Chinese oil refiners alleged to be major purchasers of Iranian oil.
If the reign of King Dollar ever ends, it probably won’t be because China usurped the throne but rather because the United States surrendered it. Washington must take note that the strategic asset underpinning the next monetary order may not be a barrel of oil but an industrial ecosystem. The danger is that financial markets may provide little warning that such a transition is underway. Markets can go long stretches ignoring the mounting evidence of change before a catalyst—such as a political stalemate over raising the U.S. debt limit—finally causes models to adjust and prices to snap up or down. U.S. officials are reluctant to plan for the erosion of the dollar’s dominance for fear that doing so would signal to markets that such a decline is inevitable. Their eagerness to point to price charts as proof of the dollar’s resilience, however, suggests that the lessons of the last financial crisis may already be forgotten. The United States must make contingency plans before the dollar’s exorbitant privilege is visibly tattered and signs of hedging against it become clear. By that time, the damage may no longer be possible to contain.
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