A group of countries led by China has started using the Chinese yuan to break the dominance of the US dollar. They have created a historic moment by leaving the US dollar behind in cross-border transactions. The Chinese yuan has become the most widely used currency in cross-border transactions, surpassing the US dollar.
According to State Administration of Foreign Exchange data, cross-border payments and collections in yuan reached a record high of $549.9 billion in March 2023, up from $434.5 billion the previous month. Reuters’ calculations show that the yuan was used in 48.4% of all cross-border transactions, while the dollar’s share, which was 48.6% in February, fell to 46.7% in March. This is a significant change from 2010, when the yuan had a 0% share and the dollar had an 83% share.
The success of the yuan can be attributed to China’s growth and its trade agreements with other countries. China has signed non-dollar trade agreements with countries such as Brazil, and Russia has largely disconnected from the global financial system after the Ukraine conflict. Since then, the yuan has surpassed the dollar as Russia’s most traded currency.
This development has raised concerns about the global dominance of the US dollar. Some believe that the dollar will continue to decline and that the yuan will further strengthen. However, some analysts think that it is difficult for the dollar to lose its global dominance.
China’s challenge to the dominance of the US dollar by using the yuan is setting an example for many countries to prefer yuan. Recently, Argentina announced that it would make payments for imports from China in yuan as a precaution against declining dollar reserves. This situation means that other countries may also consider using currencies other than the US dollar.
Arjantin to Pay For Imports from China in Yuan Exceeding $1 Billion
Argentina to pay for its imports from China in yuan, the country announced. This move, along with the increase in peace negotiations in the Middle East and between Ukraine and Russia under the leadership of China, led to an increase in the use of yuan worldwide and a decrease in confidence in the US dollar.
Many countries, including BRICS countries, had started to search for alternative currencies in response to the decrease in dollar reserves. Argentina also joined these searches and decided to make payments for its imports from China in yuan.
Argentina’s Economy Minister Sergio Massa announced that an agreement has been reached with China, and that their country will make import payments of over $1 billion to China in yuan this month. As part of the agreement, Argentine companies will make payments in yuan for imports totaling $1.07 billion from China in April. A payment of around $790 million is expected to be made in May.
Argentine President Alberto Fernandez pointed to the depreciation of the country’s peso and said, “We are experiencing a global crisis that is rising in Argentina, and this is definitely true. It is a permanent practice of the Argentine right.” These words indicate the decrease in the country’s dollar reserves and its economic problems.