China Doubles Down on Digital Yuan to Challenge Dollar’s Global Dominance

People’s Bank of China (PBOC) Governor Pan Gongsheng emphasized the risks of depending on dollar-based systems, warning that “traditional cross-border payment infrastructures can be easily politicised and weaponised.” He argued that these systems often serve as tools for unilateral sanctions, undermining global economic stability.

Pan reiterated China’s commitment to developing a more resilient and diversified international monetary framework—one where multiple sovereign currencies, including the digital yuan, coexist and reduce the systemic risks posed by a dollar-centric world order.

As part of this push, China will establish an e-CNY International Operations Center in Shanghai. This facility will support the use of the digital yuan in cross-border settlements and connect financial institutions globally to China’s evolving digital currency infrastructure.

The PBOC also reaffirmed support for the Cross-Border Interbank Payment System (CIPS), China’s yuan-based alternative to SWIFT. Six foreign financial institutions, including Standard Bank and First Abu Dhabi Bank, have recently joined the CIPS network, signaling growing international interest in yuan-denominated payments.

The digital yuan, first piloted in 2020, has since been rolled out across dozens of Chinese cities. It is used for a range of public services, including transportation, utilities, and retail purchases. Authorities now aim to expand its usage internationally, especially in trade and financial settlements with emerging markets.

Governor Pan framed the digital yuan as a “public good” that offers greater efficiency, security, and resilience against geopolitical disruptions. While the e-CNY is still in its early stages globally, its integration with CIPS and Shanghai’s new operations center could boost its appeal among foreign institutions.

In tandem with the digital expansion, Chinese regulators pledged to maintain a stable yuan exchange rate and to further open China’s capital markets. Zhu Hexin, director of China’s State Administration of Foreign Exchange, noted the importance of shielding the yuan from external shocks while enabling steady, long-term capital flows.

At the same forum, officials from the National Financial Regulatory Administration promised to improve market transparency and create a more stable regulatory environment to attract international financial institutions.

China’s efforts to promote the yuan are already yielding results. Cross-border yuan settlements hit record highs in early 2025, supported by initiatives like China UnionPay’s QR-code payment systems, which are expanding across Southeast Asia, including Vietnam and Cambodia.

In April, the PBOC encouraged Chinese state-owned enterprises to settle international contracts in yuan, and further expanded currency swap lines to strengthen the yuan’s presence in global trade.

Despite these moves, the yuan currently accounts for only about 4% of global payment transactions, ranking behind the U.S. dollar, euro, and British pound. Analysts attribute this limited share to ongoing capital controls and convertibility restrictions—barriers China has yet to fully dismantle.

While China continues to promote the yuan and digital yuan as neutral alternatives to politicized payment systems, global adoption remains uneven. Concerns persist among Western regulators about data privacy and surveillance due to the traceable nature of digital currency transactions.

Nevertheless, momentum is building. China's latest announcements reflect a deeper strategy: laying the institutional, regulatory, and technological foundations for a more diversified international currency environment.

By combining domestic innovation with global outreach, China is positioning the digital yuan as a long-term challenger to U.S. financial dominance. The establishment of the Shanghai-based operations center, the expansion of the CIPS network, and policy commitments to market openness all signal that China is serious about elevating the yuan’s role in the international monetary system.

Whether these efforts will significantly reduce dollar dependence remains uncertain. But the trajectory is clear: Beijing is betting that a multi-polar currency world—backed by digital innovation—can offer greater stability in an increasingly fragmented geopolitical landscape.