China steps up yuan push as dollar dominance faces growing challenge

China is accelerating efforts to boost the yuan’s global standing and chip away at the U.S. dollar’s dominance, marking a significant moment in the shifting balance of global finance. The push comes amid weakening confidence in the greenback and growing geopolitical uncertainty, experts told CNBC.

In a pointed message to global markets, People’s Bank of China Governor Pan Gongsheng said Beijing is exploring ways to “weaken excessive reliance on a single sovereign currency.” Speaking at the high-profile Lujiazui Forum, he also unveiled plans for a center to promote the digital yuan’s internationalization and to expand yuan-based foreign exchange futures trading in Shanghai.

China’s state-backed exchanges have followed suit. Three major bourses — in Shanghai, Dalian, and Zhengzhou — announced that qualified foreign institutional investors can now trade 16 additional futures and options contracts, including those tied to natural rubber, tin, and lead, CNBC reported.

Analysts say these steps are part of a calculated effort to deepen the yuan’s reach in global markets. Zhou Ji, a macro FX innovation analyst at Nanhua Futures, noted that expanding hedging products “increases the influence of the yuan in the global commodity pricing system.”

Beijing’s push, however, still faces skepticism. “China’s rule of law is inferior to the U.S.; it does not offer a large and deep pool of liquid assets that is open to foreign investors like the U.S.,” said Matt Gertken, chief geopolitical strategist at BCA Research. He added that Beijing has yet to address the “geopolitical risks tied to its markets.”

China has spent years building an alternative financial ecosystem, including its Cross-Border Interbank Payment System (CIPS) — a homegrown counterpart to SWIFT. According to The Economist, more than 1,700 banks now use CIPS, up 33% since the start of the Ukraine war, and clearing banks for yuan settlements have been established in 33 markets, including Turkey and Mauritius.

“China appears to be accelerating its de-dollarization efforts, though progress remains uneven,” said Dan Wang, director of Eurasia Group’s China team. Still, she noted a sharp rise in yuan-denominated settlements among global energy and commodities firms.

Across Asia, momentum toward de-dollarization is building. The ASEAN bloc has promoted local currency settlements and regional payment links to buffer against exchange-rate volatility. “Trump’s erratic trade policy decisions and the dollar’s sharp depreciation are probably encouraging a more rapid shift towards other currencies,” said Francesco Pesole, FX strategist at ING.

The dollar’s global share of foreign exchange reserves has fallen from over 70% in 2000 to 57.8% in 2024, according to CNBC. “Countries are looking at the fact that the dollar has been, and can be used as a sort of weapon on trade, direct sanctions, etc… That’s been the real change,” said Mitul Kotecha, head of FX and EM macro strategy at Barclays Asia.

Beyond Asia, BRICS nations, including China and India, are developing payment systems to bypass SWIFT and facilitate trade settlements in their own currencies.

Still, experts caution that the dollar’s supremacy is unlikely to disappear overnight. “No other currency holds the same liquidity, depth of bond and credit market as the dollar, so it’s more a matter of a reduction in its reserve appeal, rather than losing its throne,” said Pesole, adding that “gold will be the main beneficiary” of the shift.

For now, Beijing’s campaign underscores a long game — one aimed at reducing vulnerability to U.S. sanctions and asserting financial independence. The dollar’s reign may not be over yet, but its unchallenged dominance is facing its most serious test in decades.