- China accelerates de-dollarization as lending in the Chinese yuan rises sharply.
- Chinese banks’ deposits and bond investments in yuan grew to $480 billion over five years.
- Yuan settlements by Chinese exporters and importers reached their highest level since December 2020.
- The Bank for International Settlements links the shift to sanctions on Russia, noting increased yuan-denominated lending.
- BRICS countries promote local currencies over the US dollar, seeing the dollar-based system as unstable.
China is pushing hard to reduce reliance on the US dollar by increasing lending and trade settlements in its currency, the yuan. This drive supports a larger move among BRICS nations to shift away from the dollar-based system and foster a more multipolar global trade environment.
Recent data from the Financial Times shows that deposits and bond investments by Chinese banks in yuan have quadrupled to about $480 billion in the last five years. This reflects growing global use of the yuan, signaling a decline in the dominance of the US dollar.
Chinese exporters and importers are increasingly conducting settlements in yuan, reaching their highest volume since December 2020. According to Adam Wolfe, an economist at Absolute Strategy Research, “From China’s perspective, it is important because it shows that no matter what happens, it can still trade.”
The Bank for International Settlements (BIS) estimates yuan lending could increase by another $373 billion. The BIS views sanctions on Russia as a key factor motivating BRICS to expand use of local currencies rather than the dollar or euro. It noted that “The year 2022 marked a turning point away from dollar- and euro-denominated credit and towards renminbi-denominated credit to such borrowers.”
BRICS countries are encouraging broader adoption of local currencies in cross-border trade, partly by arguing that the dollar system is unstable and has built-in disadvantages. Bert Hoffman, a professor at the National University of Singapore’s East Asian Institute, explained that Chinese officials believe “a dollar-based system is inherently unstable and has disadvantages that a multicurrency system would not have.”
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