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The Central Bank of China reinforced its commitment to accelerate the dissemination of the yuan in international trade, maintaining loose financial conditions to support economic recovery and investing in a transaction infrastructure called CIPS that functions as an alternative to the Swift system. According to TIMES BRASIL – EXCLUSIVE LICENSEE CNBC, the international finance professor at FGV states that the goal is not to compete with the dollar but to offer another currency option for countries seeking diversification.
China does not hide its ambition to make the yuan a global reference currency. The Chinese Central Bank reinforced this week its commitment to maintain favorable financial conditions to support the country’s economic recovery while accelerating efforts to spread the use of the yuan, also called renminbi, in international commercial and financial transactions. The strategy includes developing its own international payment infrastructure called CIPS (Cross-Border Interbank Payment System), which allows transactions in Chinese currency independently from the Western-dominated Swift system.
According to Professor Shu Cheng, an international finance specialist at FGV EAESP, the internationalization of the yuan is not a monetary dispute against the dollar. “It is simply offering another alternative of international currencies to be used in international transactions, trade, and investment,” stated the professor. In his view, the goal of the Central Bank of China is to reduce the country’s vulnerability to external crises and ensure the functioning of the Chinese economy itself, not to replace the dollar as the dominant currency. But the path between offering an alternative and becoming a competitor may be shorter than it seems.
What is CIPS and why it matters
CIPS is a cross-border payment infrastructure created by China to process international transactions in yuan. In practice, it functions as a Chinese version of the Swift system, the network that connects banks worldwide and is largely dominated by Western institutions. The fundamental difference is that CIPS operates with the Chinese currency and allows countries to conduct bilateral transactions without needing to convert their values to US dollars.
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The existence of CIPS gives China an operational independence that few countries possess. When the United States imposes economic sanctions on a country and excludes it from the Swift system, as they did with Russia after the invasion of Ukraine, that country loses the ability to conduct international banking transactions with most of the world. CIPS offers an alternative route that cannot be blocked by Washington, making the system attractive to nations that want to protect themselves from American geopolitical pressures.
The stability of the yuan as a prerequisite
For a currency to be accepted as a global reserve, it needs to be stable. Professor Shu Cheng highlights that China has been efficiently controlling its inflation and maintaining the stability of the yuan in relation to other currencies. Since the beginning of the year, the renminbi has appreciated approximately 2.44% against the dollar, a performance that demonstrates solidity when compared to other Asian currencies, although less than the appreciation of the Brazilian real in the same period.
Monetary stability is sustained by a Central Bank that maintains strict control over exchange rates and capital flows. China does not allow the free fluctuation of the yuan as the United States does with the dollar, which generates criticism from those who advocate for fully open markets, but ensures predictability for countries and companies conducting transactions in Chinese currency. For trading partners seeking security in bilateral exchanges, knowing that the yuan will not fluctuate violently from one week to the next is as strong an argument as the interest rate.
The dollar weakened by Trump’s statements
While China works to strengthen the yuan, the American dollar faces a period of atypical fluctuations. President Donald Trump’s statements on trade policy, tariffs, and international relations have caused abrupt movements in the exchange rate, placing the dollar’s value at levels very different from those recorded a year ago. For a currency that dominates about 90% of international trade, this volatility undermines the confidence that sustains its hegemonic position.
The FGV professor observes that the independence of the Federal Reserve (the American Central Bank) is fundamental to the credibility of the dollar. When political decisions interfere with the perception of monetary stability, investors and central banks of other countries begin to question whether they should keep all their reserves in a single currency subject to political whims. It is precisely in this gap that the yuan, the euro, and other currencies seek to gain space as reserve and transaction alternatives.
What Brazil gains from currency diversification
The Brazilian government has already expressed interest in the idea of diversifying the currencies used in its trade relations and international reserves. According to Professor Shu Cheng, when the Central Bank of Brazil diversifies its reserve into various currencies, it follows the global trend of a multipolar world, where the dollar remains important but shares space with the euro, the yuan, and other currencies. This diversification preserves value and reduces risks associated with concentration in a single currency.
For Brazil, which has China as its largest trading partner, the possibility of conducting bilateral transactions directly in yuan has practical implications. Brazilian exporters of soy, minerals, and meat who sell to China could receive in yuan and use this currency to import Chinese equipment and inputs without needing to convert to dollars along the way. This direct circuit eliminates currency conversion costs and reduces exposure to dollar fluctuations that are unrelated to bilateral trade between the two countries.
The financial reform that China conducts in silence
The internationalization of the yuan is just a part of a broader financial reform that China has been conducting for years. The Chinese government has been investing in the development of the derivatives market, the creation of protection instruments for investors in Chinese currency bonds, and the strengthening of foreign exchange markets for longer terms. These measures create the necessary infrastructure for the yuan to function as a large-scale transaction and reserve currency.
A recurring criticism of China is the lack of transparency in the disclosure of economic information. Professor Shu Cheng notes that the information exists, but it is often only available in Chinese, which creates a language barrier that is mistaken for a lack of transparency. Gradually, the country has been expanding the disclosure of data in English and reforming its accounting standards to align with international norms, but the pace of this openness is still considered slow by Western analysts.
A long road, but one that has already begun
Professor Shu Cheng summarizes the situation clearly: the transformation of the yuan into a global currency is still a long way off. But China has already built the payment infrastructure (CIPS), maintains currency stability, controls inflation, and expands the domestic financial market to welcome international investors. The yuan does not need to replace the dollar to be relevant. It is enough for more countries to accept it as a viable option for trade, investment, and reserves.
Do you believe that the yuan can become a real alternative to the dollar in international trade? Tell us in the comments what you think about China’s strategy, whether Brazil should diversify its reserves more, and how you assess the impact of dollar fluctuations caused by Trump’s statements. We want to hear your opinion on the future of global currencies.
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