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China’s Strategy for a Global Yuan
At the end of January, the Chinese president relaunched an ambitious goal: to transform the yuan into a central currency within the international monetary system.
In an article published in the Chinese Communist Party’s theoretical journal Qiushi, the need for a strong, international currency capable of spreading throughout global trade and financial markets until it achieves reserve currency status was emphasized.
To support the internationalization of the yuan, the following are required:
- an authoritative central bank;
- solid financial institutions;
- greater capacity to attract foreign capital;
- a more influential role in global price formation.
The goal is clear: to increase the weight of the Chinese currency in the global economic balance.
Undervalued Yuan: a comparison with the United States
The issue of the yuan’s exchange rate has returned to the centre of international debate after the U.S. Treasury described the Chinese currency as “significantly undervalued.”
This is not a new issue. During Donald Trump’s presidency, Washington already accused Beijing of artificially keeping its currency weak in order to boost exports.
In 2025, China recorded a record trade surplus of 1.2 trillion dollars, despite U.S. tariffs. One of the most frequently cited explanations is the favourable exchange rate.
Currently, it takes about 7 yuan to buy 1 dollar, while various estimates based on purchasing power parity indicate a value of between 4 and 5 yuan per dollar, with some estimates as low as 3.5.
Any potential appreciation of the yuan would have a significant impact on:
- the competitiveness of Chinese exports;
- the global trade balance;
- economic relations between China and the United States.
Yuan and Euro: effects on trade with Europe
The depreciation of the yuan has also been significant against the euro. Since 2022, the Chinese currency has lost more than 20% against the single currency, approaching its lowest levels in a decade.
Economic consequences include:
- a reduction in European exports to China in relation to GDP;
- an increase in Chinese exports to the European Union;
- greater exposure for sectors such as the automotive sector, luxury goods, chemicals and beverages.
A weak yuan makes Chinese products more competitive on international markets but increases trade tension with Europe and the United States.
Why the Yuan is not yet a reserve currency
Unlike the dollar and the euro, the yuan is not a fully floating currency. The reference exchange rate is set daily by Chinese authorities and capital movements remain tightly controlled.
This raises a key question:
is it possible to transform the yuan into a major global currency without full financial liberalisation?
Today, the yuan is the second most widely used currency in international trade but its weight as a reserve currency remains limited:
- yuan: approximately 1.9% of global reserves;
- dollar: approximately 57%;
- euro: approximately 20%.
What does the future hold for the Yuan?
China’s strategy is based on a complex balance:
- on one hand, making the yuan a global alternative currency to the dollar;
- on the other, maintaining a competitive exchange rate to support growth and exports.
As long as state control over the exchange rate remains central, the rise of the yuan as a main reserve currency appears to be a long-term goal.
The debate between a strong yuan and a weak yuan will continue to influence international trade, global monetary policy and economic relations between China, the United States and Europe.
