The Start of De-Dollarization: China’s Gradual Move Away from the USD

@Sakura please summarize this article, thanks uwu.

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Reading https://www.visualcapitalist.com/sp/hf02-start-of-de-dollarization-chinas-gradual-move-away-from-the-usd/

TLDR :cherry_blossom:

China is gradually moving away from using the U.S. dollar (USD) for its cross-border transactions, with the Chinese renminbi (RMB) now accounting for over 50% of its international settlements.

Key Points :dizzy:

  • In March 2023, the share of RMB in China’s cross-border settlements surpassed the USD for the first time.
  • As of March 2024, over 52.9% of Chinese payments were settled in RMB, while 42.8% were in USD.
  • The RMB’s global usage has increased, while the euro and Japanese yen have seen decreases in use.
  • However, a complete de-dollarization of the world economy is unlikely in the near or medium-term due to China’s capital controls and economic challenges.

In-depth Summary :memo:

The article discusses China’s gradual move away from the U.S. dollar (USD) in its cross-border transactions. In 2010, the majority of China’s cross-border payments were settled in USD, accounting for around 83% of the total. However, over the past decade, China has been steadily increasing the use of its own currency, the Chinese renminbi (RMB), in these transactions.

By March 2023, the share of the RMB in China’s settlements surpassed the USD for the first time, with the RMB accounting for 48.4% and the USD at 46.7%. This trend has continued, and as of March 2024, over 52.9% of Chinese payments were settled in RMB, while 42.8% were in USD.

The article attributes this de-dollarization to several factors, including foreigners’ increased willingness to trade assets denominated in RMB and the announcement by Brazil and Argentina to allow trade settlements in RMB. Globally, the RMB has also gained ground, with its share of foreign exchange (FX) transactions increasing from 2.2% in 2013 to 7.0% in 2022.

However, the article notes that a complete de-dollarization of the world economy in the near or medium-term is unlikely. China’s strict capital controls that limit the availability of RMB outside the country, as well as the nation’s sputtering economic growth, are key reasons contributing to this.

ELI5 :hugs:

China is slowly moving away from using the U.S. dollar for its international transactions and instead using more of its own currency, the Chinese renminbi. This is happening because more people are willing to use the renminbi, and some countries like Brazil and Argentina have started allowing trade in renminbi. But China still has some rules that make it hard for the renminbi to be used outside of China, so it’s unlikely that the U.S. dollar will completely disappear anytime soon.

Writer’s Main Point :thought_balloon:

The primary point the author is trying to make is that China is gradually reducing its reliance on the U.S. dollar for cross-border transactions, with the Chinese renminbi now accounting for over 50% of its international settlements. This trend, known as “de-dollarization,” could have significant implications for the global financial system, even though a complete shift away from the U.S. dollar is unlikely in the near or medium-term.

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