China's Strategy for the Internationalization of the Renminbi

Amid growing geopolitical tensions, China has been taking strategic steps to reduce its dependence on the Western financial system, particularly the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system, with the aim of expanding the international use of the Renminbi (RMB)—the official currency of the People’s Republic of China. This effort goes hand in hand with the expansion of its own international payment system, known as CIPS—the Cross-Border Interbank Payment System.

CIPS was created by China in 2015 with the aim of facilitating international payments in RMB. It functions as a dedicated infrastructure for settling international payments, which reduces the need to use SWIFT and strengthens the internationalization of the Chinese currency itself. SWIFT, on its own, does not move money directly, functioning instead as a global communication network between banks. Thus, it serves as a bridge connecting financial transactions across the globe, being essential for the vast majority of international commercial transactions. In general, this structure gives Western countries significant influence over the international financial system, particularly the United States.

Faced with an increasingly interdependent global landscape and under the constant threat of power struggles, there is a growing need for countries such as China and Russia to seek alternatives that reduce their vulnerability to international sanctions and restrictions. Thus, the ability to conduct financial transactions that do not depend on the approval of central countries makes states opposed to the global order less exposed to changes in the international landscape and potential sanctions. However, CIPS alone would not be sufficient for the operation to take place effectively. Consequently, China has needed to expand this system over the years, gradually and strategically. Studies show that the internationalization of the RMB initially took place in countries near China—first in Asian nations, then in Latin America, and later in Africa—demonstrating the system’s potential for progressive expansion.

In addition, it was necessary to establish “swap lines,” which are agreements signed between the People’s Bank of China (PBC) and dozens of central banks around the world, allowing countries to use the RMB directly in bilateral trade. These swap lines increased the RMB’s share of payments between China and other countries by between 2.2 and 3.7 percentage points.

Another important step was the development of offshore banks—outside China—authorized to handle RMB and settle these payments. These banks facilitated access to the RMB in different regions of the world, strengthening the infrastructure necessary for the operation of CIPS.

In April 2026, a system was launched that allows Indonesian and Chinese consumers to pay for purchases with their smartphones, using local apps to scan QR codes that operate in local currency. This initiative is part of a broader effort by Beijing to build a regional digital payments network, reducing costs and foreign exchange risks. Analysts note that the main objective is to advance de-dollarization, promoting the international use of the yuan and financially integrating China with key partners in Southeast Asia. In fact, similar agreements have been implemented in other countries: since October 2025, Chinese tourists have been able to pay with domestic digital wallets in Thailand, and in Vietnam, UnionPay (expanded to Alipay in 2026) already enables transactions in yuan; analogous arrangements exist in Malaysia and Singapore. Thus, by connecting its platforms to partner systems, China transforms financial technology into geoeconomic power.

From a practical standpoint, these QR Code agreements expand local payment channels and reduce the need to use the dollar in international retail transactions. Although they are primarily aimed at tourists and small purchases, they represent a new layer in the financial infrastructure. Thus, the Indonesia–China bilateral system does not replace SWIFT in large-scale operations, but operates in retail, tourism, and consumer spending. If several countries integrate their national systems (including, for example, similar initiatives in India, Russia, or other expanded BRICS members), a growing share of international transactions would begin to flow through these “alternative” channels in local currencies. In this way, cross-border QR Code agreements help reduce dependence on the dollar for routine payments by creating regional payment routes in local currency; however, as analysts warn, they do not immediately topple the dollar or alter the global financial order on their own.

The Chinese yuan has gradually gained ground in international use (by 2025, it accounted for about 39% of China’s foreign-currency trade flows), but it still represents a modest share of the global financial system. According to the IMF, only about 2% of all cross-border banking transactions are conducted in renminbi. In terms of official foreign exchange reserves, for example, by the end of 2025 the dollar held 56.77% compared to just 1.93% for the renminbi. These figures reflect the persistence of the dollar’s “exorbitant privilege,” rooted in its deep markets and confidence in U.S. assets. Experts note that structural factors (such as the liquidity of U.S. Treasury securities and the breadth of Western financial markets) still underpin the dollar’s dominance. Even so, practical measures, such as the expansion of China’s CIPS and QR payments, show that, little by little, international trade can be diversified into smaller, regional corridors.

A key point is the role of SWIFT in the U.S. sanctions strategy. Traditionally, excluding adversarial banks from SWIFT has been a powerful weapon of financial coercion. The CFR analysis highlights that, as more transactions migrate to CIPS (China’s alternative messaging networks), a larger share of yuan flows no longer appears in SWIFT statistics. In practice, this means that as global banks join CIPS, transactions bypassing SWIFT tend to increase. The authors note that this phenomenon “may gradually weaken” SWIFT’s effectiveness as a tool for U.S. sanctions. In other words, if sanctioned regimes (such as Iran, Russia, or others) find secure routes outside of SWIFT (directly through CIPS or via national systems), the U.S. ability to isolate these countries would suffer a blow.

However, analysts point out that this marginal loss of sanctioning power does not mean an immediate collapse of the dollar. The fundamentals of the U.S. currency remain solid: it continues to offer liquid safe-haven assets and a robust global financial infrastructure. Thus, these de-dollarization initiatives tend to fragment the global financial system, creating “regional corridors” for payments in local currencies, but keep the dollar at the center of the system, alongside emerging alternatives.

China’s initiatives on QR Code interoperability and the expansion of CIPS are concrete components of its strategy to internationalize the yuan. By facilitating direct transactions in local currencies and creating alternative payment networks, Beijing is building a parallel financial infrastructure that, step by step, reduces the dollar’s exclusive hegemony in the retail and tourism sectors. Even so, the actual impact on the dollar has been gradual and limited. Experts emphasize that the renminbi’s advances consist of “marginal diversification” of the international monetary system, not an abrupt replacement. Ultimately, the most likely outcome is a more fragmented global financial system: the dollar remains the central pivot, but is increasingly “surrounded” by regional payment routes in local currencies, the result of bilateral agreements and economic blocs. Thus, China’s measures are expected to weaken to some extent the U.S.’s ability to impose sanctions via SWIFT, but they do not eliminate the structural relevance of the U.S. dollar in the short term.