Strategies and ToolsJan 15, 20263 Min

De-Dollarization Accelerates: China’s Push to Settle Trade in Yuan

De-Dollarization is no longer just an idea, as it has become measurable. In 2025, China’s yuan made up 3.17% of all global payments and has gone from 14% to over 30% of Chinese trade in 2025. Russia and Kazakhstan have also fully de-Dollarized their bilateral trade.

The US dollar still remains dominant, accounting for 89.2% of the world's foreign exchange market. De-Dollarization countries are developing payment rails that circumvent Western-based financial systems altogether. This has created a second trade infrastructure, one that is growing much faster than markets predicted.

China's Currency Strategy Gains Traction

The Chinese currency strategy aims to rely less on the US dollar (USD) for trade and commerce. This involves building systematic infrastructure and bilateral agreements with other nations to support international trade.

In 2025, the People’s Bank of China announced it would establish an International Digital Yuan Centre in Shanghai. They will also be expanding yuan-denominated foreign exchange futures trading. Some recent key developments in this area include:

• Asia-Pacific borrowers accessed $44 billion more in cross-border yuan funding in Q1 2025 amid the US dollar decline.
• In 2025, the yuan’s share of the world’s foreign exchange market was 8.5%, showing clear US dollar vs yuan trends.
• The USD accounted for over 88% of the global foreign exchange market, highlighting its dominant size.
• By the end of 2025, the Bank of China's Middle East facilitated over 900 billion yuan (about $126.5 billion) in transactions.

China's Yuan Internationalisation initiatives also include commodity markets. Iron Ore Suppliers in China are being pressured to accept Yuan trade for their sales. The amount of Iron Ore (via a yuan letter of credit) imported by China from January to September 2024 was 3.06 million tons.

It is a 25% increase over the same period last year. Bao Steel and Angang Steel have entered into yuan-based contracts with international suppliers and major Chinese steel producers.

BRICS De-Dollarization Strategy Takes Shape

While the BRICS de-Dollarization strategy focused on exchanging local currencies for dollar-based trade between members, they have no plans to create a single BRICS currency. As of 2024, 90% of BRICS countries conducted their bilateral trade with each other. They were using their respective national currencies instead of dollars.

The BRICS are also building a blockchain-based system called BRICS Bridge. It will connect the financial systems of all BRICS countries so that trade between them can be settled in central bank digital currencies (CBDCs). Within the BRICS, de-Dollarization countries are seeing results:

• Trade between Russia and Kazakhstan has been 100% dollar-free. Trade is now solely in Russian Rubles and Kazakhstani Tenge.
• China and India have negotiated trade agreements for yuan-rupee settlements between the two BRICS countries.
• Brazil has started trade in Brazilian Reals between BRICS partners. It is a part of the larger BRICS de-Dollarization strategy.
• The BRICS currency payment platform enables trade between the BRICS countries without dollar price quotes or dollar transactions.

US Dollar vs Yuan Trends

This data clearly shows dollar dominance is being eroded by Yuan expansion in each of these areas.

Yuan Trade Expansion in Energy Markets

Yuan trade has begun to penetrate strategically significant commodity markets, specifically energy. In 2022, Chinese President Xi Jinping stated that the Shanghai Petroleum and Natural Gas Exchange will be “fully utilised in RMB settlement in oil and gas trade” with members of the Gulf Cooperation Council (GCC) nations.

China agreed to purchase large volumes of crude oil and to import LNG on a long-term basis from the GCC, with yuan-based settlement being a high-priority area, reflecting China's trade in yuan 2025. Saudi Arabia, China’s largest crude oil supplier and exporter, presents a key test for Yuan adoption in the petro-dollar space.

Exporters reporting at the 2024 Canton Fair reported an increase to 10-20% of total exports with yuan-based settlement, compared to single-digit percentages the prior year. This highlights the de-Dollarization impact on global markets.

US Dollar Decline Creates Opening

In 2025, US dollar declines were the largest ever. As a result, the US dollar index had fallen around 10% in the first 9 months of the year. The rapid decline of the dollar enabled the exploration of alternative currencies.

US dollar vs. yuan trends show that the offshore yuan has risen about 2% against the dollar in the first 6 months of 2025. Several foreign investors and government organisations (specifically those of the BRICS nations) have been seeking an alternative to the dollar. The changes being made due to market dynamics are:

• Reduced attractiveness of the dollar due to policy uncertainty and geopolitical tensions, resulting in US dollar decline.
• Reduced reliance on dollars in Asia-Pacific countries through currency hedging.
• Increased participation in international payments by China, doubled since 2022, demonstrating the internationalisation.
• Yuan reached its highest level since, November 2024 elections.

De-Dollarization Impact on Global Markets

Global markets have shown uneven but structurally significant evidence of de-Dollarization. The yuan was the sixth-most actively traded currency (based on SWIFT May 2025 payments), accounting for only 2.89% of all global payment values. It ranked behind the dollar at 48.2%. But the trend is clearly upward. Global de-Dollarization will be impacted by technical barriers that include:

1. Liquidity in global markets.
2. Developing a regulatory framework globally.
3. Encouraging international suppliers to participate broadly.

China has a clear strategy for de-Dollarization:

• A $100 billion fund to finance Hong Kong businesses with yuan-denominated financing was announced in February 2025.
• New futures contracts are being developed to offer hedging tools for international institutions.
• China's yuan is increasingly involved in commodity pricing mechanisms. It strengthens internationalisation.
• Letters of Credit (L/Cs) will allow direct yuan trade payment channels between international entities. It eliminates the need for conversion costs. Thereby increasing the yuan’s use.

The BRICS+ plan to promote trade using local currencies through the BRICS payment system. This will increase financial stability and economic growth. It will also reduce the dollar dependence for de-Dollarization countries. Cross-border yuan settlements will cut foreign exchange conversion costs for Chinese buyers. They will shorten transaction settlement times and improve contract predictability. This will show the de-Dollarization impact on global markets.

Conclusion

De-Dollarization countries have shown that they can settle in their own currencies. Therefore, China has developed its trade infrastructure, established bilateral currency agreements, and entered commodity markets.

This, in turn, provides alternative ways to settle in non-dollar-denominated trades. Although the dollar still holds 89.2% of the foreign exchange market and the Yuan 8.5%, there is a decrease in the gap between the two as de-Dollarization countries demonstrate the feasibility of settling locally.

Disclaimer: The information provided in this article is for educational and informational purposes only and should not be considered financial, investment, or trading advice.

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