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- China wants the yuan to play a bigger global role but hasn't called for it to replace the dollar.
- Xi Jinping said China was committed to internationalizing the yuan "in an orderly manner."
- State media is touting the yuan, but one expert offered a "rational view" on de-dollarization.
For months, Western headlines have been flashing warning after warning that China is pushing for its currency to replace the US dollar as the world's reserve currency of choice.
"The US dollar conquered the world. Is it at risk of losing its top spot?" NPR asked in June, as it pitted China as a top contender against the greenback.
"Move over, US dollar. China wants to make the yuan the global currency," The Washington Post reported in May.
Even Insider reported in May that the yuan is emerging as a strong contender to the dollar's dominance.
Many of the calls for de-dollarization have been coming from emerging nations — like Russia and Brazil — some of which are currently sanctioned by the West and its allies.
While China might not be happy with American dominance — in global politics, culture, or the financial system — Beijing is far from openly advocating for the "redback," another name for the yuan, to immediately replace the greenback.
Xi Jinping has touted yuan internationalization — but has not mentioned dominance
The Chinese Communist Party holds its congress every five years. At its most recent congress in October 2022, President Xi Jingping touted his vision of a China that's economically independent and insulated from external shocks. Analysts dubbed the vision "Fortress China."
This push to become "Fortress China" accelerated after other nations hit Russia with sweeping sanctions last year.
"Mechanisms for countering foreign sanctions, interference, and long-arm jurisdiction will be strengthened," Xi told the meeting in October.
Xi's speech "was an explicit call to boost the PRC's sanctions-busting mechanisms," Rory Green, the chief economist for China at the London-based macroeconomic-forecasting consultancy TS Lombard, wrote in an April note titled "Death of the Dollar?"
In April, Xi again raised China's goal of yuan internationalization in Qiushi magazine, a Chinese Communist Party journal. Xi wrotethat China was committed to promoting yuan internationalization "in an orderly manner."
But, while China wants the yuan to play a more prominent international role, the nation doesn't necessarily want the yuan to be the world's dominant reserve currency — China isn't even ready for a complete break from the dollar, Green told Insider in May. Key challenges for China include Beijing's unwillingness to open its capital accounts or run a deficit.
Two China-focused analysts told Insider they had not seen Beijing explicitly calling for the yuan to replace the dollar as the dominant reserve currency, with the language calling for a push in "internationalization" and "facilitating usage" instead.
State media has touted the rise of the yuan, with more intense coverage recently
While Xi and his administration have been nuanced in communicating their vision for the yuan, China's state media has been blunter with its messaging. Multiple state-affiliated outlets have championed the rise of the currency while expounding the ills of a dollar-dominated global-trading and financial system in the last few months.
But just as Xi instructed, the media outlets have promoted a "steady and prudent" approach to broadening the international use of the yuan — while at the same time stepping up its coverage of the increasing use of yuan. A report from the Xinhua state news agency on July 1 discussed the Central Bank of Argentina's plan to include the yuan in the country's deposit and withdrawal currencies.
Media outlets are also closely tracking the yuan's internationalization, with the Chinese Communist Party's flagship publication, People's Daily, devoting one full page to the development on May 30.
On June 25, The Chinese Communist Party-linked Global Times even trumpeted a 0.25% rise in the share of yuan transactions on the SWIFT financial-messaging system when the use of the Chinese currency rose to 2.54% from 2.29% in April.
However, even with the increase in the use of the yuan for global transactions, it's still dwarfed by the greenback — and the euro. The US dollar and the euro account for a 43% and a 32% share of the payment respectively, SWIFT reported.
But at least one analyst has called for a rational view on de-dollarization
While much of the recent de-dollarization debate has been centered on the dollar versus the yuan, the euro is the second-most commonly held currency after the dollar, followed by the Japanese yen. The Chinese yuan is in fourth place, meaning it has a long way to go — and several other competing currencies in the way — before it gets to global domination.
The Stanford historian Niall Ferguson told CNBC in May that the yuan isn't likely to replace the dollar in the next two decades. The euro hasn't been able to unseat the dollar in the more than 20 years since it went into circulation, he added.
And even within Chinese-state affiliated media, there has been at least one call for nuance.
In April, Liqing Zhang, the director of international-finance studies at the Central University of Finance and Economics in Beijing, wrote a commentary piece for Securities Times, a state-owned financial-news outlet.
In the piece, Zhang listed the current Fed's monetary tightening — rather than geopolitics — as a key reason for de-dollarization
"Local currency settlement does not necessarily weaken the US dollar's status as a global reserve and pricing currency, nor does it necessarily lead to the end of 'dollar hegemony,'" Zhang wrote.
After all, "there is still room for improvement in the freely convertible currencies of many developing countries," Zhang added, without naming any of these countries.
July 31, 5.24 p.m.: This story has been edited throughout for clarity.