For the first time ever, the amount of trade settled in yuan has surpassed the US dollar in China's trade transactions. Amid changes in the international landscape such as the deterioration of relations between Saudi Arabia, a pro-American power in the Middle East, and the United States, as well as the war in Ukraine, China's rise is emerging as a factor threatening the dollar's hegemony.
On the 26th (local time), major foreign media outlets cited data from China's State Administration of Foreign Exchange, reporting that the amount of yuan used in China's international trade reached $549.9 billion (approximately 737 trillion won) last month, a nearly 27% increase compared to the previous month ($434.5 billion).
The share of yuan settlements in China's trade payments was 48.4% (as of March), marking the first time yuan has become the top currency in cross-border transactions within China.
Compared to 2010, when the share of yuan settlements was nonexistent, this represents remarkable growth. Bloomberg News evaluated this as another milestone in China's efforts to reduce its dependence on the dollar.
China, which has long aimed to crack the dollar's hegemony, has been committed to the internationalization of the yuan. In his keynote speech at the first-ever China-Gulf Cooperation Council summit held in Riyadh, Saudi Arabia, last December, Chinese President Xi Jinping introduced cooperation initiatives to be prioritized over the next 3 to 5 years, requesting Middle Eastern oil-producing countries to settle oil transactions in yuan. This was the first official formalization of Petro-Yuan by China.
The expansion of trade volume between Russia and China following Western sanctions against Russia after its invasion of Ukraine in February last year also contributed to the increased influence of the yuan.
Russia currently uses not only the ruble but also the yuan for energy payments such as oil. Having been excluded from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), making dollar transactions impossible, Russia is increasing its use of the yuan.
China also took advantage of the cracks beginning to form in the long-standing alliance between the United States and Saudi Arabia. Last month, China implemented yuan loans for trade payment purposes at a Saudi state-owned bank for the first time.
Recently, Brazil also agreed to expand transactions using the yuan and the Brazilian real during a summit. The agreement allowed Brazilian companies to use the China-created "Cross-Border Interbank Payment System (CIPS)" instead of SWIFT, the dollar payment network.
Brazilian President Luiz In?cio Lula da Silva visited the headquarters of the New Development Bank in Shanghai on the 13th and expressed his discomfort with dollar hegemony, saying, "During my first term, I asked myself every night why all countries have to trade in dollars." Argentina also decided to pay for goods imported from China in yuan instead of dollars starting next month.
However, there are also forecasts that the yuan is insufficient to shake the dollar's power, given that the global economy is still led by the United States and its allies, and the US remains the only country capable of supplying sufficient currency liquidity.
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