China's Renminbi Rising Challenging the US Dollar's Global Dominance: There are many historical, economic, and political reasons behind how the dollar became the world's most powerful currency. After World War II, the Bretton Woods Agreement of 1944 established the dollar as the global reserve currency, pegged to gold, thereby strengthening its position. The US emerged from World War II as the largest and most stable economy, with minimal effects of the war, and its financial institutions, such as the Federal Reserve, gained the trust of countries around the world.

In addition, the dollar's use in global trade, especially in oil transactions, further strengthened its position. Countries needed to keep dollars for trade and reserves. This was the reason why the US dollar became dominant in the world market.

The dollar is facing a challenge from another powerful country

Now times are changing. The first name to challenge the dollar is the Chinese Yuan/Renminbi. China, the world's second-largest economy, is now engaged in promoting its country's currency Renminbi for trade in the world. The influence of the Renminbi (RMB) is increasing.

Here we are explaining to you in 10 points what China is doing to make its currency compete with the dollar and to make the Renminbi/Yuan popular in the world.

1. Rise of Chinese currency

The Chinese Yuan (Renminbi) is projected to have a 4.3% share of worldwide payments or transactions, up from 0% in 2010, by 2023, overtaking the Japanese Yen.

2. Yuan dominance in Russia

In 2023 the yuan will overtake the dollar as the most widely used cross-border currency in Russia.

Chinese currency vs US currency

Image courtesy : iStock

3. China's dollar bond issue

China issued $2 billion of dollar bonds in Riyadh, Saudi Arabia, bearing lower interest rates than US Treasury bonds.

4. China becoming a pressure agent by giving loans

China has started lending money to many countries through basic infrastructure projects, including Sri Lanka, Pakistan, and Laos.

5. Giving loans to BRI countries

China's Belt and Road Initiative (BRI) has extended loans to 152 countries, giving China a significant global financial role.

6. China's currency swap deals

China has signed currency swap deals with 40 countries, worth a total of 4 trillion yuan (about US$600 billion).

 7.China's Government Bonds

China's 10-year government bonds are expected to yield close to 2%, making them attractive to global investors. 

8.China's US bond-holding issue

China has reduced its holdings of US Treasury bonds, falling from $1.3 trillion in 2013 to $780.2 billion by the end of 2024.

9. Making Yuan an International Currency

China is continuously taking steps to make its currency Yuan acceptable globally, so that dependence on the dollar can be reduced.

10. Challenging the Dollar

China is now moving towards challenging the dollar's dominance as the international currency, just as the dollar overtook the British pound a century ago.