By John Q. Hosedrinker 
China is aiming to establish a “strong currency” capable of international use in trade, investment, and foreign exchange markets, with the goal of achieving global reserve status. President Xi Jinping delivered this message in a 2024 speech to officials, which was later published by Qiushi, the Communist Party’s theoretical journal. This initiative comes amid increasing global financial market uncertainty and questions regarding the value of the US dollar. The excerpts highlighted the core attributes of a financial powerhouse, including a strong economy, leading technological strength, and a credible, widely used currency.
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China is on a ‘strong currency’ mission to make the yuan a global reserve: Xi, and it’s a topic that sparks a lot of debate. The core idea is simple: China wants the yuan, also known as the RMB, to become a currency that other countries hold as reserves, just like the US dollar. But the path to that goal is anything but straightforward.
One of the big hurdles the yuan faces is its lack of free trade. For a currency to be trusted as a global reserve, it needs to be easily bought and sold, with money flowing in and out of the country without a lot of restrictions. Currently, the yuan isn’t fully convertible, meaning there are limits on how easily people can exchange it for other currencies. This also brings the reality that the Chinese government has a strong hand in controlling how it’s valued.
This government control is another major concern. The Chinese government is known to devalue its currency to stay competitive, which can make it hard for other countries to trust it as a stable store of value. Then there’s the question of transparency and trust. The Chinese government doesn’t always share data in ways that are easily verified and reliable, which leaves a lot of uncertainty about the true state of the economy. Also, because China is a dictatorship, there are concerns about the rule of law and the security of assets held in yuan, and that the government could take steps that would make the currency unpredictable.
The fact that China is a net exporter also complicates things. For a currency to be widely held, there generally needs to be a trade deficit, where a country buys more from the rest of the world than it sells. This helps put more of that currency into the global market. Given China’s current focus on self-sufficiency, this may be difficult to achieve.
It’s not just about policy. To succeed, the yuan needs to build trust. This means a stable currency, allowing for international investments and capital flow, and, most importantly, confidence from foreign investors. It’s a long game, not something that can happen overnight.
Many think the Euro could be a more realistic contender. However, the United States’ influence could wane if it continues to experience internal turmoil. Some suggest this could lead to a shift in power, potentially opening the door for the Euro, or even the yuan, to rise.
Of course, the US dollar still has a dominant grip on the world stage. It’s the currency most used for international trade. However, there’s a growing sense that the world may be heading towards a multi-currency system, not just a single reserve currency. If that’s the case, perhaps China’s ambition of making the yuan a global reserve currency may not mean taking over the dollar’s role, but adding another option to the table.
China faces a crucial choice: it could make the yuan freely convertible and embrace open markets. This would likely cause an outflow of capital as people get their money out of the country. This would make it easier for the yuan to be a global currency. This could be viewed as a signal that Beijing is serious about this mission. However, for now, a lot of people aren’t convinced, and so it remains just talk.