For decades, the US dollar has been the world’s dominant reserve currency. Now, moves by China and India to promote the yuan and rupee in cross-border trade are raising questions about whether that dominance can last.
China Pushes the Yuan on the Global Stage
Beijing is doubling down on its ambition to make the yuan a preferred trade currency. According to a Reuters report, China’s State Council is drafting a plan with clear targets to boost yuan usage in international markets. The proposals even consider launching yuan-backed stablecoins digital tokens tied to the currency’s value to facilitate global transactions.
India Relaxes Rules on Rupee Trade
New Delhi is also taking steps to internationalize its currency. The Reserve Bank of India recently eased restrictions on “Rupee Vostro Accounts,” making it simpler for foreign banks to trade directly in rupees. Officials say the move will reduce reliance on the dollar while strengthening India’s position in global trade flows.
A Wider Trend of ‘De-dollarization’
While the latest policies from Asia’s two giants have attracted attention, the shift away from the dollar has been underway for years. The greenback’s share of global foreign exchange reserves has been shrinking steadily from 71% in 1999 to around 58% in 2024. Economists attribute this not just to US trade tensions, but also to the rising clout of emerging economies across Asia, Africa, and Latin America.
Even so, no single currency has yet emerged as a serious alternative. The euro’s share of reserves has remained stable at about 20%, and while the yuan doubled its presence between 2016 and 2022, it still accounts for less than 3% of global reserves today.
What It Means for the US
A weaker dollar could have mixed consequences at home. On the downside, American consumers may face higher prices for imported goods, stoking inflation. On the upside, a cheaper currency makes US exports and labor more competitive, potentially boosting domestic manufacturing and job creation.
Ripple Effects Across the World
The dollar’s decline would reverberate globally. Exporters reliant on US markets may earn less, forcing them to seek alternative destinations. Investors with heavy exposure to US stocks and bonds could see lower returns. Conversely, emerging markets in Asia, Africa, and Latin America might benefit as trade and investment diversify beyond the US.
For China, India and other major exporters, this shift could accelerate efforts to build consumer markets in the Global South, laying the groundwork for a more multipolar financial system.
A Dollar in Slow Retreat, Not Collapse
Experts caution against writing an obituary for the dollar just yet. Despite its gradual decline, the US currency remains the world’s most liquid and trusted asset advantages that are hard to replace. Still, the push by Beijing and New Delhi signals a world increasingly unwilling to rely solely on Washington’s currency, and that could reshape global trade in the years ahead.
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