China's increasing movement towards the lessening of its reliance on the US dollar
In the global economic landscape, China's yuan has been making significant strides in cross-border transactions and international trade. According to recent data, the yuan has led in non-bank cross-border payments into China since November 2024, a position it has consistently held through August 2024. This trend continued in 2025, with the yuan accounting for the majority of non-bank cross-border transactions in both directions.
The International Monetary Fund (IMF) reports that the yuan's share of global allocated foreign exchange reserves was only 2% in Q3 2019. However, this figure peaked at 2.8% in Q1 2022, before slightly decreasing. In Q3 2024, $257bn of global allocated foreign exchange reserves were held in yuan, accounting for a 2.2% share of the $11.8tn total.
The internationalization of the yuan is a key focus for ongoing efforts to increase its use in global money movement. The Hong Kong Monetary Authority believes that the proposed Asian international settlement house, designed to rival Belgium's Euroclear, could potentially increase the yuan's global influence.
China's shift towards the yuan for international trade has resulted in significant gains in recent years. In 2024, for the first time, the yuan held a larger share than the US dollar in both outbound and inbound non-bank cross-border transactions. In January 2025, $3.5bn worth of payments from China were made in yuan, representing 55% of the total, while $2.5bn were made in US dollars, accounting for 40%. Payments into China also have a yuan majority, with $3.1bn in yuan transactions in January 2025, accounting for 50%, compared to $2.8bn in US dollars, representing 46%.
This increase in the use of the yuan is not limited to China's trade with other countries. In response to Western embargoes of Russia, the yuan's share has become increasingly prevalent in key BRICS countries.
To capitalise on these trends, a market strategy focusing on China’s economic trends in international trade and cross-border payments should consider the following key insights and approaches:
1. **Understand China's Economic Outlook and Trade Environment:** China’s GDP growth is forecast to be around 4.5% to 4.6% in 2025, supported by easing trade tensions and policy measures to sustain growth. However, trade policy uncertainty and tariffs remain elevated, affecting export dynamics.
2. **Focus on Market Localization and Diversification:** Chinese companies are successfully shifting from low-cost, price-based competition to localized, premium positioning in foreign markets. Localization strategies reduce tariff exposure, improve speed to market, and build stronger relationships with foreign governments and consumers.
3. **Leverage Innovations in Cross-Border Payments:** Cross-border payments are critically impacted by international trade flows and policy. Adapting payment infrastructure to comply with local regulations while offering seamless, efficient options can enhance competitiveness.
4. **Monitor and Adapt to Policy and Regulatory Changes:** Closely track China’s monetary and fiscal policy changes, including interest rate adjustments and stimulus measures, as these influence corporate investment and consumption trends. Anticipate shifts in trade agreements or tariff regimes and build contingency plans to mitigate risks associated with trade volatility.
By aligning your market strategy with China’s evolving economic and trade landscape—focusing on trade policy volatility, local market adaptation, consumption stimulation, and innovative payment infrastructures—you can capitalise on growth opportunities while managing emerging risks in 2025 and beyond.
- In the global finance industry, the increasing use of the Chinese yuan in cross-border transactions and international trade represents a significant opportunity for business growth, especially given China's focus on the internationalization of its currency.
- As the yuan continues to gain influence in non-bank cross-border payments and international trade, understanding its role in the global finance business becomes increasingly important for businesses looking to capitalize on emerging growth opportunities.
