Yuan Overtakes Dollar in China's Cross Border Payments, but Global Limits Persist

A majority share at home, a smaller footprint abroad

The yuan reached roughly 53 percent of China's cross border payments and receipts in May 2024, while the dollar's share fell to about 43 percent. Settlement data from the State Administration of Foreign Exchange showed the Chinese currency accounting for a majority of those transactions through 2023 and into 2024, marking a milestone in Beijing's campaign to expand its use beyond China's borders.

China's goods trade has also moved toward the yuan. Around 28 to 30 percent was settled in the currency in 2024, compared with about 15 percent in 2021. At the upper end of that range, the share had roughly doubled. More business involving Chinese companies, banks and financial markets was being conducted through yuan accounts instead of dollar accounts.

The global picture remained different. SWIFT data placed the yuan at about 4 to 5 percent of international payments. It sometimes ranked second behind the dollar in trade finance, briefly moving ahead of the euro, while International Monetary Fund figures put its share of allocated central bank reserves at a little over 2 percent.

The dollar continued to dominate global trade finance and reserves. Understanding the yuan's progress therefore requires looking at several measures separately: payments crossing China's borders, settlement of Chinese trade, bank financing for commerce, and the currencies central banks hold for financial security.

Beijing's policies and changes in international relations helped drive the shift. A trade settlement pilot launched in 2009 was followed by clearing banks, agreements to exchange currencies with foreign central banks, and a Chinese payments platform. The war in Ukraine and sanctions on Russia accelerated adoption, while interest in currency diversification spread across parts of Asia, Africa and Latin America.

How a trade pilot became a currency strategy

The global financial crisis of 2008 to 2009 exposed the risks of depending on a single funding currency for trade and finance. Beijing responded with a strategy to expand the yuan's use for trade and investment while continuing to manage money moving into and out of China.

China began with pilots allowing exporters and importers to settle invoices in yuan. Settlement means making the payment that completes a transaction. Authorities then designated offshore yuan clearing banks, which help process payments outside mainland China, and negotiated bilateral swap lines with foreign central banks.

Those swap arrangements give a partner central bank access to yuan that it can make available to local banks and companies during financial stress. They support a practical goal: ensuring that firms trading with China can obtain the currency needed to pay their bills.

Several dates show how the expansion developed:

• 2008 to 2009: The global financial crisis exposed vulnerabilities associated with reliance on one funding currency.
• 2009: China launched a pilot allowing trade invoices to be settled in yuan.
• 2021: Around 15 percent of China's goods trade was settled in yuan.
• 2022: Brazil's central bank raised the yuan's share of its reserve assets to more than 5 percent.
• 2023: Yuan trading volumes surpassed dollar volumes on the Moscow Exchange, while China's settlement data showed a majority share for the yuan in cross border transactions.
• May 2024: The yuan reached roughly 53 percent of China's cross border payments and receipts, against about 43 percent for the dollar.

China's approach combined easier access for selected transactions with continued controls over domestic finance. The aim was to make the yuan more useful internationally without giving up Beijing's ability to manage credit, interest rates and the exchange rate.

Investment flows explain much of the payments total

China's cross border settlement figures cover all balance of payments categories, including trade and investment. The balance of payments records economic transactions between a country and the rest of the world. A payment for imported goods and a transaction involving a Chinese bond can therefore both enter the cross border totals.

Portfolio investment transactions accounted for more than 60 percent of cross border yuan flows in the data described, while goods trade accounted for about 20 percent. Direct investment, such as investment in a business rather than a traded security, represented a smaller share. Buying and selling financial assets was consequently a major driver of yuan activity.

Stock Connect and Bond Connect created investment channels linking mainland markets with Hong Kong. Portfolio flows through these programs are denominated in yuan. Foreign investors gained more ways to buy and sell Chinese assets, generating currency flows as they entered or left positions.

Major index providers also added Chinese stocks and bonds to global benchmarks. These benchmarks guide the investment choices of funds, so inclusion drew foreign investment and lifted the yuan's share of China's cross border transactions.

The large investment component explains why the payments total and the trade settlement share are far apart. China's majority share reflects both commerce and activity in its financial markets. The separate measure of yuan use in transactions between countries other than China remained much smaller.

Trade payments, bank finance and reserves measure different uses

Chinese companies and their foreign partners can agree to invoice and settle goods and services in yuan. By 2024, that share had approached 30 percent. The choice depends on both sides accepting the currency and having suitable accounts, funding and payment arrangements.

Trade finance measures another part of commerce. Banks provide guarantees that help sellers receive payment and supply funding for the period between shipping goods and collecting money. According to SWIFT's tracking, the yuan's share rose from low single digits to the middle of the single digit range, at times placing it second behind the dollar.

Central bank reserves serve a different purpose. They are holdings used to support financial stability and meet international payment needs. IMF figures placed the yuan at around 2 to 2.4 percent of allocated reserves, compared with nearly 60 percent for the dollar and around 20 percent for the euro. Allocated reserves are those for which the currency composition is identified.

These measures move at different speeds because their users have different needs. A company may accept yuan to pay a Chinese supplier, a bank may finance a shipment in yuan, and a central bank may still prefer to hold most of its reserves in other currencies. Each decision depends on access to funds, ease of conversion and confidence in the assets held.

Russia's shift accelerated yuan adoption

Sanctions following the war in Ukraine reshaped China's network of trading and financial partners. Russian companies and banks became heavily reliant on yuan for trade and finance as Russia redirected energy exports toward China and imported more Chinese goods.

Moscow Exchange figures showed yuan trading volumes overtaking dollar volumes in 2023. Chinese purchases of Russian oil and pipeline gas were often priced and paid in yuan, giving Russian sellers a growing reason to receive and hold the currency.

Some countries outside China and Russia also used yuan to settle transactions with Russian entities, avoiding the use of dollars or euros in business linked to Russian trade. This expanded the currency's role beyond a straightforward payment between a Chinese buyer and a Russian seller.

Russia became the clearest example of how sanctions and trade ties could reinforce one another. Energy sales generated yuan receipts, while purchases of Chinese goods created uses for those funds. Interest in diversifying currencies elsewhere in Asia, Africa and Latin America added to the wider pool of potential users.

Beijing wants wider use while retaining financial control

Chinese policymakers have sought greater use of the yuan in commerce while maintaining tight control over domestic finance. Full convertibility, meaning broad freedom to exchange the currency and move funds across borders, would weaken their control over interest rates, credit allocation and the exchange rate.

China's financial framework relies on large banks directed by the state and on capital controls. These arrangements help channel savings toward priority sectors and manage financial cycles. Large, rapid movements of money into or out of the country could disrupt that framework and complicate economic policy.

Huang Qifan, an academic counselor with the China Finance 40 Forum and former mayor of Chongqing, has presented currency internationalization as a means of supporting practical economic stability. The veteran policymaker and academic described the goal as protecting the real economy and the resilience of supply chains:

China's drive to internationalize its currency is not aimed at replacing the US dollar's global role, but to maintain the stability of global industry and supply chains.

Huang's position captures the policy balance: make the yuan useful to businesses that produce, buy and transport goods while preserving Beijing's ability to direct its domestic financial system. The same controls that support that domestic strategy also limit the currency's appeal to some international holders.

CIPS, swap lines and the digital yuan extend access

The Cross border Interbank Payment System, known as CIPS, processes yuan payments among participating banks. It connects hundreds of direct and indirect participants, helping banks clear and settle payments with fewer intermediaries. Clearing organizes payment obligations; settlement completes the transfer of money.

CIPS can operate alongside SWIFT messaging. Many cross border yuan payments still use SWIFT to send instructions, while CIPS handles settlement. The parallel architecture provides another route for parts of the payment process and a contingency for banks and companies concerned about sanctions risk or messaging outages.

The People's Bank of China, or PBOC, has expanded bilateral swap arrangements to more than 50 central banks. When a line is activated, a partner can obtain yuan to meet demand in its market, settle trade invoices or provide liquidity to banks and companies. Liquidity means having funds available when a payment needs to be made.

Swap lines can support trade and financial stability during disruptions. They can also signal confidence and reduce transaction costs for partners that conduct substantial commerce with China.

Chinese authorities have also tested a central bank digital currency, the digital yuan, often called e CNY. Pilots covered domestic retail payments and some cross border trials involving Hong Kong and other jurisdictions. The goal was faster, cheaper payments while retaining regulatory oversight.

Experiments involving several central banks explored how a digital yuan could work alongside other currencies in trade settlement and foreign exchange transactions completed in real time. These trials added another payment channel to China's wider effort to make its currency easier to use.

Trade ties, borrowing and investment create demand

Countries selling commodities to China or importing large quantities of Chinese goods often have a practical reason to use yuan. Some energy exporters in the Middle East and Africa expressed interest, while several Asian partners used it more frequently in trade in intermediate goods, the components and materials used to make finished products.

Companies can find yuan settlement simpler when dealing with a Chinese state firm or when payments can be matched against yuan receipts from sales to China. A business earning yuan and spending yuan has less need to exchange currencies between those transactions. In many cases, that convenience matters more than a political preference.

Debt and investment relationships also contribute. Some African borrowers, including in Kenya, Angola and Ethiopia, reworked parts of obligations to Chinese lenders to increase yuan use or issued yuan bonds that could be paired with yuan trade receipts.

Brazil's central bank raised the yuan's share of reserve assets to more than 5 percent in 2022, a step aligned with Brazil's large trade relationship with China. Across markets, Chinese banks' external yuan claims roughly quadrupled over five years to approach the equivalent of $480 billion, helping fund trade and project finance in the currency.

Panda bonds allow foreign issuers to raise yuan inside China. Issuance expanded as Chinese interest rates stayed below United States rates for much of the preceding two years. Lower funding costs made borrowing in China's market more attractive relative to dollar borrowing.

Offshore yuan bonds and loans gave multinational companies and sovereign borrowers another way to match debt with yuan income. Improving liquidity also allowed companies and banks to hedge more of their balance sheets in yuan. Hedging means using financial arrangements to reduce exposure to changing exchange rates, which can make yuan invoicing and settlement easier to manage.

Controls and market depth still restrict wider adoption

China's capital controls and the yuan's limited convertibility remain major constraints. Quotas and approval processes govern money moving into and out of the country, limiting the flexibility that some international businesses and investors seek.

Offshore yuan liquidity is deeper than it was a decade earlier, but remains thin compared with dollar markets. Instruments for hedging currency risk exist, although their depth and the periods they cover are limited in many financial centers. Clearing capacity can also tighten during financial stress.

Foreign investors have cited concerns about data transparency, legal predictability and the handling of financial distress. Market intervention, abrupt regulatory changes and a prolonged property slump made some foreign holders cautious. Weak household demand and efforts to rein in local government debt weighed on expectations for growth.

Those conditions reduced the attraction of holding yuan as a lasting store of value for many reserve managers. Receiving a currency for a commercial payment and choosing to keep substantial savings in it require different levels of confidence and flexibility.

The dollar benefits from vast pools of safe, liquid assets and a legal system trusted by global investors. It remains the default currency for commodity pricing, invoices and corporate treasury operations, the management of a company's cash and financing.

Established use reinforces that position: businesses find a currency convenient when customers, suppliers and banks already use it. For the yuan to expand further beyond trade involving China, multinational companies would need deeper and more predictable funding and hedging markets. Central banks would also need confidence that yuan assets could be held without sacrificing liquidity or flexibility.

The measures that will show whether use broadens

China's goods trade settlement share is one practical measure of further adoption. A sustained move from the high twenties into the middle of the thirties would indicate wider use by major partners. SWIFT's trade finance rankings provide another measure: consistently holding second place behind the dollar would signal broader acceptance among banks and exporters.

Energy invoicing is also worth following. A large, durable shift by major producers toward accepting yuan for oil or gas sold to China would increase cross border liquidity and demand for yuan assets.

CIPS participation and swap line activity offer further signs. More direct participation by banks outside China, fewer yuan payment messages routed through SWIFT, and more active use of PBOC swap lines would show greater comfort with China's payments arrangements.

Policy choices remain central. Wider channels for lasting foreign investment, deeper derivatives markets and clearer rules on data and governance would strengthen the yuan's attraction for trade and reserves. Derivatives are financial contracts often used to manage risks such as changes in currency values.

The timing and size of any further gains remained uncertain as of November 4, 2025. The figures already described a currency used much more extensively in transactions involving China, with substantial limits still facing its wider international role.

The Bottom Line

• The yuan reached roughly 53 percent of China's cross border payments and receipts in May 2024, compared with about 43 percent for the dollar.
• Yuan settlement of China's goods trade rose to around 28 to 30 percent in 2024, from about 15 percent in 2021.
• Portfolio investment accounted for more than 60 percent of cross border yuan flows, while goods trade represented about 20 percent.
• The yuan represented about 4 to 5 percent of international SWIFT payments and around 2 to 2.4 percent of allocated central bank reserves.
• Russia's yuan use expanded sharply, with yuan trading volumes surpassing dollar volumes on the Moscow Exchange in 2023.
• CIPS, swap arrangements with more than 50 central banks and digital yuan trials supported wider payment access.
• Panda bonds, offshore borrowing and growing external yuan claims by Chinese banks expanded financing options.
• Capital controls, limited offshore liquidity and concerns about transparency and legal predictability continued to restrict adoption.
• Trade settlement shares, trade finance rankings, energy invoicing and access to funding and hedging markets remained the main measures to watch.