In February 2025, the exchange rate of yuan to U.S. dollar was 7.17. In the past decades, the yuan has undergone a slow liberalization, being increasingly exposed to the international money market. FOREX history of the Renminbi After the Communist Party took control over China it introduced a unified currency which has since then undergone many changes. During the planned economy, the yuan had a fixed exchange rate. At the time, the currency’s exchange rate was deliberately set high to support the industrial development, which relied on imports. After the country committed to opening its economy, the Renminbi was gradually exposed to the supply and demand of the global FOREX markets. Until 2005, the yuan remained pegged to the U.S. dollar. Currency manipulator, or not? As China manifested its role in the global economy, the country was repeatedly accused of manipulating the value of its currency. Especially, voices from the United States claimed that Beijing would intentionally keep the value of the yuan low. A cheap Renminbi would make products from China more attractive for foreign buyers which in turn would support the country’s export-driven economy. However, currency manipulation is difficult to make out and even harder to prove, which is why no significant actions have been taken.

The euro and U.S. dollar made up more than seven of 10 SWIFT payments worldwide in 2024, outperforming many other currencies. This is according to a monthly report meant to track the market share of China's yuan renminbi within the international bank transfer system SWIFT. Although China holds the largest forex reserves in the world, the yuan ranked as the eighth-used currency in international payments. The figures concern customer-initiated and institutional payments and exclude trade. Discussions on the potential weakening role of the U.S. dollar especially touch world trade and forex. For example, the share of the USD in forex reserves declined visibly against the euro and Japanese yen in 2023. What sparked this de-dollarization trend, and will it continue? Trade sanctions and de-dollarization De-dollarization in 2023 is mentioned mostly alongside trade and the BRICS countries - an informal name given to Brazil, Russia, India, China, and South Africa. The combined GDP of BRICS is about 25 percent of the world's economy. After the start of the Ukraine war and Russia received economic sanctions, the BRICS slowly evolved into a trading bloc. The group increasingly wanted its own currency to settle payments within the trade bloc, to avoid using the U.S. dollar. In August 2023, BRICS will gather in South Africa to discuss the creation of such a new joint currency. Additionally, 19 countries - including Argentina, Algeria, Egypt, Saudi Arabia, Turkey, and Yemen - expressed interest in joining the BRICS group. CBDC, or projects into a digital payment settlement A factor of future uncertainty for the U.S. dollar is how central bank digital currencies (CBDC) develop in emerging countries. Several projects exist between individual countries that specifically target cross-border interbank payments. A cooperation between Thailand and Hong Kong, Inthanon-Lionrock, ranks as the most advanced of these projects. CBDC does not require the U.S. dollar to function. Tangible such as commodities or gold can back them. The value of transactions processed with CBDC is to grow by 260,000 percent between 2023 and 2030.

The U.S. dollar was the most common currency in foreign exchange reserves in 2023, comprising more than three times the amount of the euro in global reserves that year. This total peaked in 2015, partly due to the strength of the dollar during the Eurozone crisis. The share of the U.S. dollar has lost since to the Japanese yen and euro, as well as other currencies. Why do foreign exchange reserves matter? When countries with different currencies export goods, they must agree on a currency for payment. As a result, countries hold currency reserves worth trillions of U.S. dollars. After World War II, the U.S. dollar itself became the international currency in the Bretton Woods Agreement and is thus the most common currency for international payments. The United States Treasury is also seen by most as risk-free, giving the country a low-risk premium. For this reason, countries hold U.S. dollars in reserve because the currency holds value relatively well eventually. China and currency reserves Since 2016, the International Monetary Fund has included the Chinese renminbi (yuan) as part of the Special Drawing Rights (SDR) basket. This decision recognized the influence of the renminbi as a reserve currency, particularly in several Asian countries. China also holds significant foreign exchange reserves itself, funded by its large positive trade balance.

In 2023, the gross domestic product (GDP) of China amounted to around 17.8 trillion U.S. dollars. In comparison to the GDP of the other BRIC countries India, Russia and Brazil, China came first that year and second in the world GDP ranking. The stagnation of China's GDP in U.S. dollar terms in 2022 and 2023 was mainly due to the appreciation of the U.S. dollar. China's real GDP growth was three percent in 2022 and 5.2 percent in 2023. In 2023, per capita GDP in China reached around 12,600 U.S. dollars. Economic performance in China Gross domestic product (GDP) is a primary economic indicator. It measures the total value of all goods and services produced in an economy over a certain time period. China's economy used to grow quickly in the past, but the growth rate of China’s real GDP gradually slowed down in recent years, and year-on-year GDP growth is forecasted to range at only around four percent in the years after 2023. Since 2010, China has been the world’s second-largest economy, surpassing Japan.China’s emergence in the world’s economy has a lot to do with its status as the ‘world’s factory’. Since 2013, China is the largest export country in the world. Some argue that it is partly due to the undervalued Chinese currency. The Big Mac Index, a simplified and informal way to measure the purchasing power parity between different currencies, indicates that the Chinese currency yuan was roughly undervalued by 31 percent in 2023. GDP development Although the impressive economic development in China has led millions of people out of poverty, China is still not in the league of industrialized countries on the per capita basis. To name one example, the U.S. per capita economic output was more than six times as large as in China in 2023. Meanwhile, the Chinese society faces increased income disparities. The Gini coefficient of China, a widely used indicator of economic inequality, has been larger than 0.45 over the last decade, whereas 0.40 is the warning level for social unrest.