The Chinese Yuan is already a global reserve currency, and Chinese companies are taking advantage.

Quick Overview

The Chinese Yuan (RMB) is rapidly gaining traction as a global reserve currency, evidenced by its cross-border settlement share rapidly approaching that of the US Dollar, and Chinese companies are leveraging this by paying for goods in RMB to avoid US dollar shortages and sanctions.

Key Points: In the first three quarters of 2025, cross-border yuan settlement reached 13 trillion yuan (US$1.85 trillion), up 11% year-on-year, accounting for 39% of China's goods trade, four times the 2017 level. The Yuan's share in China's cross-border payments and receipts is rapidly increasing, closing the gap with the US Dollar, which has seen its share decline since 2011. Bilateral currency swap agreements (40 in force, totaling about $386 billion USD) allow central banks to exchange local currencies, facilitating direct trade and investment settlement. Zambia began collecting taxes and royalties from Chinese mining firms in Yuan and cycling the currency back to Beijing for imports and loans, creating a template for other resource-rich, debt-laden African nations. US 10-year bond yields offer significantly higher returns (approx. 4.24%-4.28%) compared to major developed economies like Germany (-2.88%) and Japan (-2.23%), which drains dollars from global banking systems. The move by countries like Zambia to use RMB is interpreted as a practical response to acute US dollar shortages and severe liquidity pressure, rather than purely a geopolitical signal.

Context: The video explores the increasing internationalization of the Chinese Yuan (RMB) and how this shift is driven by both practical economic needs (like dollar shortages) and China's long-term strategy to build a financial system outside of the US dollar's dominance. The discussion references data on cross-border yuan settlement growth and specific examples of countries, such as Zambia, adopting RMB for trade and debt servicing, often facilitated by bilateral currency swap agreements.

Detailed Analysis

The video argues that the Chinese Yuan (RMB) is already functioning as a global reserve currency, pointing to rapid growth in its cross-border settlement share, which reached 39% of China's goods trade in the first three quarters of 2025 (13 trillion yuan or US$1.85 trillion, up 11% year-on-year). This growth trajectory suggests the RMB is quickly gaining ground on the US Dollar in international transactions. The speaker notes that 30 bilateral currency swap agreements are in force, totaling about $386 billion USD, allowing central banks to exchange local currencies for trade and investment settlement, bypassing the dollar. A key example is Zambia, which is now collecting taxes/royalties from Chinese mining firms in Yuan and using it directly to pay for imports and service loans from China. This is seen as a practical response to severe US dollar shortages and liquidity pressure faced by nations like Zambia, rather than just a political move, and provides a blueprint for other resource-rich, debt-laden African nations with strong ties to China. Concurrently, the video highlights that high US fiscal deficits require US 10-year bonds to offer significantly higher yields (4.24%-4.28%) compared to Germany (-2.88%) or Japan (-2.23%), which is contributing to draining dollars from global banking systems, further incentivizing countries to seek alternatives like the RMB.