As China aims to make the RMB a more widely used global currency, how might this affect the role of the US dollar in international finance?

Haley's answer to: What are the implications of RMB internationalization for the USD?

Summary: RMB Internationalization and its Ripple Effects on the USD

Curious about how China’s push to internationalize the Renminbi (RMB) might reshape the global financial landscape and the all-important role the US dollar (USD) has played for decades? You’re not alone. I’ve personally navigated cross-border payments in both currencies and watched friends in trade finance suddenly reconsider their hedging strategies. From payment screens freezing on RMB options to heated debates in industry Zoom calls, the ground is genuinely shifting. This article unpacks the core question: As the RMB steps onto the global stage, what could this really mean for the USD’s dominance?

Why care about RMB internationalization?

Let’s get the practical question out first: Why does this even matter for your business or investments? If you’re an exporter, multinational CFO, or even a fintech developer (like the time my startup tried to build a multi-currency API), changes in reserve currency status could directly hit your bottom line, cost structure, and access to financial tools. This piece aims to make that clear, step by step—minus the jargon overload.

Step 1: Understanding the basics — What does “RMB internationalization” actually mean?

RMB internationalization basically means making the Chinese yuan/RMB a more widely used currency outside China’s borders: settling trade, denominating debt, storing reserves, and facilitating investments worldwide. Think about it—today, most commodities trade in dollars, companies price global deals in dollars, and central banks hoard dollars as their comfort blanket (or vault filler). The RMB’s internationalization tries to break into that club.

If you’ve tried sending money from the US to China, you might have noticed SWIFT payment options suddenly offering “pay in RMB.” This didn’t really exist a decade ago—it’s the direct result of new Chinese policies, like expanding offshore RMB clearing banks in Singapore, London, Frankfurt, and the like (BIS Quarterly, 2021).

Step 2: What’s pushing the RMB onto the world stage?

China’s government is actively pushing the RMB outward with a multi-pronged approach: by setting up bilateral swap lines (think: currency lifelines) with over 40 countries, launching the Cross-Border Interbank Payment System (CIPS) as an alternative to SWIFT for RMB deals, and encouraging trade partners to settle invoices in RMB.

BIS International Currencies Table (screenshot)

Screenshot from BIS Quarterly Review, showing RMB’s global payment share rising from under 2% (2015) to ~3% (2023). Source

In my own work, the impact was visible as soon as our Chinese counterparts started insisting on RMB settlements, sometimes “just to test the process.” It wasn’t always smooth: my team once mistakenly processed an RMB invoice as HKD (Hong Kong dollar), leading to a two-week payment freeze—whoops! But these growing pains are part of a much larger shift.

How might this affect the USD? The real-world implications

Here’s where things get interesting—and uncertain. The USD, for nearly 80 years, has been the “world’s reserve currency.” But the more the RMB is used and trusted, the less dominant the USD could become. Or could it? Here’s the messy, real-life detail.

Trade settlements: Companies can now settle deals in RMB directly, skipping dollar conversions. This sometimes means lower costs and less currency risk for Chinese counterparties. For example, data from SWIFT shows that as of mid-2023, the RMB was used in 3.1% of global payments, up from less than 1% a decade ago (SWIFT RMB Tracker).
Reserves and investments: Central banks are diversifying. The IMF’s COFER data found the RMB’s share of global reserves grew to around 2.5% by end-2023 (IMF COFER database). Small, but directionally noteworthy.
Sanction-proofing: Several governments have cited US sanctions as a reason to reduce dependency on the USD. Russia and Iran, for instance, have done large energy deals with China denominated in RMB (Nikkei Asia, 2023).

I remember a heated exchange at a payment tech event in Singapore—one banker joked, “the USD is like air, impossible to replace,” and a Chinese fintech exec shot back, “but even the air gets polluted.” Banter aside, these little changes are starting to add up.

Case Example: Verified Trade Standards Clash (A Simulated Export-Import Scenario)

Let’s say Brazil signs a major commodity deal with China (real case: Reuters, 2023), settling directly in RMB. Brazilian exporters suddenly need to certify their trade for Chinese customs—using RMB-based documentation systems. But here’s the snag: Brazilian “verified trade” rules require a clearing process under Banco Central do Brasil, while China’s General Administration of Customs has divergent, sometimes stricter rules.

Country	Standard Name	Legal Basis	Executing Agency
China	China Customs ‘Single Window’ Verified Export	Customs Law of PRC, Art 30-40	General Administration of Customs (GACC)
Brazil	SISCOMEX Verified Export	Decree No. 660/1992	Federal Revenue Service (Receita Federal)
USA	ACE Export Certification	19 CFR § 192.14	Customs and Border Protection (CBP)

Diving into these in real life, arranging RMB settlement often means grappling with these regulatory mismatches—you log into GACC’s portal (I once spent 40 minutes just resetting my password...), shuffle through translations, and then cross-check the paperwork with both sides’ rules. If standards diverge, shipments get delayed, and sometimes the whole trade shifts back to USD “just for simplicity.”

Industry Insights: What the experts say

In a recent OECD roundtable, Dr. Karen Chen, a trade finance specialist, pointed out: “While RMB internationalization is real, the infrastructure and legal backing for cross-border RMB deals still lag behind the US system. Most clients hedge in dollars—out of both habit and necessity.”

At the World Customs Organization (WCO) meeting (June 2023), a quote on record: “The pervasive nature of USD-denominated standards means that unless there’s a major geopolitical jolt, change will be gradual.” You can find the summary here: WCO Council, June 2023

Is RMB really a threat to the USD… or just a flavor of diversification?

Here’s the honest, on-the-ground answer, from both my experience and what recent IMF research says (IMF WP/23/183): the RMB is growing, but the USD’s entrenched role remains massive.

Networks matter: Even with alternatives, most global banks, SWIFT infrastructure, and commodities pricing default to USD. (Try opening an RMB account at a US bank…good luck!)
Confidence: Investors, so far, still consider US Treasury debt safer, more liquid, and more transparent than Chinese debt—despite recent volatility.
Verification headaches: RMB internationalization only works if local and cross-border “verified trade” processes line up—for now, there are a lot of hiccups. (If you don’t believe me, try running a dummy RMB export through both the Chinese and Brazlian systems—it’s painfully obvious.)

So, will the RMB knock the USD off its perch? Not anytime soon. But the winds do seem to be shifting: more global deals in RMB, more central banks dipping their toes in, and more headaches (but also opportunities!) for anyone dealing with cross-border finance.

Conclusion & Next Steps: What does it all mean—practically?

Having fumbled through plenty of cross-currency deals and watched global regulations update in fits and starts, here’s my real-world take: RMB internationalization matters, but it’s ‘additive,’ not (yet) revolutionary. You should keep an eye on:

Sudden changes in your trade partners’ payment requirements—especially China or those sanctioned economies.
New digital infrastructure like CIPS or the ongoing evolution of e-RMB pilots.
Updates from official organizations (WCO, OECD, WTO) as they reassess cross-border certification compatibilities.
Tools for smoother multi-currency exports/imports—don’t underestimate the old-fashioned spreadsheet for tracking your documentation status across agencies!

If you’re running a business, consult your trade accountant and compliance officer before diving into RMB deals. I’m still double-checking our latest SBC agreement, and—full disclosure—our last RMB payment to Shenzhen got held up over a mismatched “export verified” code. The lesson? Progress is real, but patience (and a willingness to debug your own mistakes) is still essential.