In 1971, U.S. Treasury Secretary John Connally famously declared that the dollar was “our currency, but your problem,” highlighting the global reliance on the U.S. currency. Since then, the dollar’s dominance has only grown, with China becoming one of its most dependent users due to its export-driven economy. Now, Beijing is working to reduce this dependence. In a 2024 speech, Chinese leader Xi Jinping called for accelerating China’s transformation into a “leading financial power,” with a strong currency as a key foundation. The renminbi, he argued, should be widely used in international trade, investment, and foreign exchange markets to be considered truly strong.
China’s ambition to challenge the dollar is not new, but its economic and military capabilities make it a more credible threat than past efforts by Europe or Japan. The internationalization of the renminbi would provide China with financial survivability, protecting it from potential U.S. sanctions, such as those imposed on Russia after its 2022 invasion of Ukraine. To deter the U.S. from wielding the dollar as a weapon, China needs a financial second-strike capability, redirecting global trade and finance to a renminbi-based network.
The durability of this shift depends on creating a healthy global demand for an anchor asset priced in renminbi. China’s dominance in the green economy could provide this anchor. Xi’s goal is not to replace the dollar but to establish the renminbi as a strong second option, breaking the dollar’s monopoly and constraining U.S. unilateral financial actions. This would allow China to preserve its state-led economic model while gaining more financial autonomy.
However, maintaining a global renminbi system would require significant changes to China’s financial markets, allowing foreign investors broader access. This could undermine Beijing’s control over capital allocation, a key tool for securing loyalty from China’s business class. For many wealthy Chinese, the dollar remains an essential form of political risk insurance, offering protection against arbitrary asset seizures or imprisonment.