Saudi Arabia · China · Russia · Ukraine · Fortune Technology
China sees the yuan vs. dollar rivalry like Pepsi vs. Coke, expert says, ‘never the market leader, but serviceable in a pinch’
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Heavy is the head that wears the crown, and contrary to popular belief, Beijing doesn’t want the yuan to dethrone the dollar as the world’s dominant currency, according to a top China scholar.
Key facts
- The financing stage is gaining momentum too as Chinese banks have more than doubled their yuan lending to overseas borrowers between 2023 and mid-2026
- Since China prefers to keep the dollar on top, the real reason for promoting the yuan abroad is to prevent the U.S. from weaponizing the financial system against it, Liu added, similar to how Russia
- Meanwhile, the Iran war has raised doubts about the petrodollar, which goes back to a deal struck in 1974 when Saudi Arabia agreed to price its oil in dollars and invest surpluses in U.S. assets
- (For what it’s worth, Pepsi has fallen further behind Coke in the cola wars and was dealt a major symbolic defeat recently when KFC said it would replace PepsiCo soft drinks with Coca-Cola’s products at its 3,700 U.S. restaurants
Summary
While China has been trying to internationalize the yuan, also known as the renminbi, it doesn’t want the obligations that come with being the global reserve currency, Zongyuan Zoe Liu, senior fellow for China studies at the Council on Foreign Relation, wrote in Foreign Affairs this month. To truly take the dollar’s place would require open capital markets, which would threaten the Communist Party’s control over who gets capital and how, she explained.