Chinese Yuan's Global Trade Growth: More About Russia Than International Acceptance


Chinese Yuan's Global Trade Growth: More About Russia Than International Acceptance

The yuan's internationalization is falling short of China's goals, as its limited convertibility and usability leave it far behind the dollar, restricting its use mainly to heavily sanctioned countries like Russia with few other options.

Chinese state media Global Times misleadingly claimed that "the yuan's settlement share in global trade hit a record of 24 percent." In reality, the yuan does not account for 24 percent of global trade settlement. What actually happened is that China now settled 24 percent of its own international trade in yuan. Given China's trade volume, this equates to less than 5 percent of global trade being settled in yuan, which is much closer to the economic reality.

SDRs are held by central banks alongside dollars and other currencies, but since the dollar makes up over 43 percent of the SDR basket while the yuan accounts for only 12 percent, holding SDRs further increases indirect exposure to the dollar. This means the true dominance of the U.S. dollar in global reserves is even greater than it appears when looking only at directly held dollars.

Major barriers to the yuan's internationalization persist, including Beijing's control over its value, which limits market influence. Additionally, the yuan's restricted convertibility and usability hamper its global reach, while the dollar's dominance remains strong, largely due to oil being priced in USD.

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