According to Zongyuan Zoe Liu, a Council on Foreign Relations expert, Beijing is not seeking to replace the dollar as the world’s dominant currency, but to internationalize the yuan enough to reduce the United States’ ability to impose financial sanctions unilaterally. This strategy would allow China to retain its capital controls while giving Chinese companies a way to circumvent potential dollar-based sanctions. The yuan is already used in more than 100 countries, while China’s cross-border interbank payment system counted 1,829 participants and could reach more than 5,200 banks in 191 countries as of June. Liu nevertheless argues that the dollar retains a decisive advantage, notably because foreign investors held just 1.6% of China’s bond market in March, compared with 27% of the U.S. bond market. In the longer term, China’s dominance in clean-energy supply chains could allow essential products to be priced in yuan and weaken the petrodollar.
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