StoneX Analyst Vincent Deluard Explores China’s Push for Global Yuan Adoption

Key takeaways:

China’s deepening relationship with Russia is allowing them to test “de-dollarization at scale”
The Chinese yuan accounted for one-third of Russian trade as of December 2023
Despite China’s efforts, the yuan still only accounts for 4.5% of international payments

In a recent article from Newsweek, Vincent Deluard, Director of Global Macro Strategy, gave his insights on China’s efforts to reduce dependence on the dollar and their goal to diminish the U.S.’s global currency dominance.

"The China-Russia relationship is allowing China to truly test de-dollarization at scale," he said. The financial relationship between China and Russia has deepened significantly since Russia was largely barred from the global financial system after the invasion of Ukraine in February 2022.

"Achieving strategic autonomy is China's guiding star," Deluard explained. "You could take the Russia story as a catalyst."

As of December 2023, the Chinese yuan accounted for about one-third of Russian trade – a clear shift away from the dollar. In fact, according to a Nikkei analysis, China's international transactions in the RMB eclipsed those conducted in dollars for the first time in Q1 of 2023.

Other countries within the Middle East, Latin America and Africa are increasingly seeing the yuan as a viable option for international transactions, as evidenced by Saudi Arabia signing a $7 billion currency swap agreement with China last November.

Deluard compared China’s strategy of increasing the yuan’s use and continuous stockpiling of commodities, including gold, oil and copper, as similar to the U.S. creation of the Strategic Petroleum Reserve after recognizing the risk of dependency on Middle Eastern oil. Despite China’s best efforts, the yuan still represents a very small part of international payments (rising to 4.5% versus the dollar at above 47%).

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