[How About This Book] "International Sanctions Against Russia Are Not Someone Else's Problem"... China Focuses on 'Renminbi Dominance'

Book Review: "US-China Currency War"
The Global Economy Built Around the Dollar Over the Past Century
Emerging Economies Remain Vulnerable Due to High Dollar Dependence
China, in Rivalry with the US, Focuses on De-dollarization
Future Prospects: Escaping Economic Sanctions and the New Currency War

On February 24, 2022, when Russia invaded Ukraine, the United States and other Western countries imposed sanctions that excluded Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Being expelled from SWIFT, a network with over 15,000 member banks worldwide, effectively meant the suspension of international payments and settlements. At the same time, Western countries, including those in Europe, froze Russia’s foreign exchange reserves held within their jurisdictions. As a result, Russia’s dollar and euro assets were essentially held hostage.

In 2024, Western countries agreed to use the interest income generated from Russia’s frozen assets to support Ukraine, subjecting Russia to the humiliation of having its own assets used to aid its wartime adversary. These financial sanctions are also a key reason why China, which could potentially clash with the United States over the Taiwan issue at any time, is challenging the dollar’s dominance.

The author, a global monetary policy expert and former head of the KB Financial Group Research Institute, analyzes that China is attempting to undermine the dollar-centric system in preparation for potential sanctions from the United States and Western allies in the event of a Chinese invasion of Taiwan.

The author explains that, in the event of economic warfare, China’s $3.2 trillion in foreign exchange reserves could be frozen, and trade transactions and settlements by Chinese companies and individuals could be halted. For this reason, China has long sought ways to protect its foreign reserves. “China’s simulations of a Taiwan invasion include not only military operations but also the defense of its financial system and training to prepare for financial sanctions.”

The author identifies the internationalization of the renminbi as China’s core strategy to prepare for Western sanctions. The renminbi internationalization strategy consists of signing currency swap agreements between countries, establishing direct trading markets overseas, and building its own payment network. The core objective is to disrupt the dollar-centric international financial order, as it is obvious that fighting the United States within the existing dollar system would inevitably lead to defeat.

Currency swaps between countries are the most strategic tool China employs. Emerging economies are particularly vulnerable to economic shocks caused by liquidity shortages and sharp exchange rate fluctuations whenever global financial markets are shaken. Non-reserve currency countries are even more susceptible to the influence of the dollar system. In fact, when the U.S. Federal Reserve signaled in 2013 that it might end its long-standing quantitative easing policy, emerging market financial markets suffered a major shock. At the time, when then-Chairman Ben Bernanke mentioned the possibility of gradually reducing bond purchases, interest rates soared and massive capital outflows from emerging markets caused turmoil. This phenomenon became known as the “taper tantrum.”

The author explains that, while U.S. currency swaps are centered on Western advanced economies, China mainly targets emerging markets to reduce global dependence on the dollar. As of 2025, China has signed currency swap agreements with more than 40 countries, and Korea first entered into such an agreement with China at the end of 2008. When the agreement was renewed in October 2020, the size was expanded from 64 trillion won to 70 trillion won.

According to the People’s Bank of China’s renminbi internationalization report, as of September 2023, direct renminbi trading markets had been established in 31 cities across 29 countries worldwide. Starting with Hong Kong in 2003, the network expanded to Taiwan and Macau in 2012, Singapore in 2013, London, Frankfurt, Paris, and Seoul in 2014, and further to Sao Paulo, Kazakhstan, Pakistan, and Laos in 2022. From January to September 2024, the trading volume of the Seoul won/renminbi direct trading market reached $2.63 billion, marking a 26% growth over the past decade. This ranks Seoul fourth globally, after Singapore, the United Kingdom, and Hong Kong.

The author explains, “When a direct trading market is established, the exchange rate between the local currency and the renminbi is determined directly by market supply and demand, rather than through the indirect cross-rate method via the dollar. This not only benefits foreign exchange transactions but also enhances payment services, financial product development, and investment opportunities. Additionally, it facilitates renminbi settlement and clearing procedures.”

UnionPay is emerging as China’s global card company, competing against Visa and Mastercard. Previously, even when using domestic cards for overseas payments, transactions had to go through Visa or Mastercard, but UnionPay is now challenging this structure.

Its greatest competitive advantage is low fees. As of March 2025, UnionPay’s overseas brand fee stands at 0.25%, which is lower than Visa and Mastercard’s approximately 1%. By the end of 2024, 250 million UnionPay cards had been issued in 84 countries outside mainland China, and the card is now accepted in 183 countries worldwide.

The author forecasts that China’s renminbi strategy is focused not on short-term shocks but on long-term, gradual de-dollarization. If the United States repeatedly makes strategic mistakes, its relationships with allies deteriorate, it loses the trust of the international community, and it weakens its own soft power through economic retaliation or trade wars, opportunities may arise for China. “As always, China believes that ‘time is on our side.’ They maintain the view that periods of disorder in the international order will not necessarily work against them.”

This book systematically and clearly organizes China’s strategy to undermine the dollar’s dominance, providing ample background knowledge and insight to understand the current situation.

US-China Currency War | Written by Kyungyup Cho | Miraeui Chang | 232 pages | 19,000 won