De-dollarization is the most buzzing word in the global financial sectors across Asia, Africa, and South America. Emerging economies are focusing on lifting their local currencies on the global stage by ending reliance on the US dollar. The US sanctions are what pushed the de-dollarization agenda ahead and China made use of the opportunity to include the Chinese yuan for trade settlements.
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The development puts the USD in the spotlight as developing countries no longer want to give importance to the currency. Amid the US and Western sanctions on emerging economies, the Chinese yuan is becoming the most used currency in their countries. From Russia to Pakistan and the UAE, the Chinese yuan is being widely accepted as the de-dollarization initiatives advance rapidly.
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The Chinese Yuan Benefits From De-Dollarization
The US Treasury Secretary Janet Yellen confirmed that the US sanctions opened the floodgates of de-dollarization across the world. The move made China fill in the void and the Xi Jinping administration convinced developing countries to use the Chinese yuan. The de-dollarization initiative is partially a success as the Chinese yuan is the most used currency in Russia.
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“Trading in Chinese yuan is convenient for both Russia and China,” said Maia Nikoladze, Associate Director at the Atlantic Council. “Russia does not have too many other currency alternatives. While China benefits from exerting more economic influence over Moscow, and also makes progress towards internationalizing the yuan,” said the analyst. The move indicates that the US opened the gates of de-dollarization by itself through sanctions.
Even Brazil, Argentina, South Africa, and Saudi Arabia are looking to follow Russia on the de-dollarization path. These countries are accepting the Chinese yuan as payment for cross-border transactions, which was not the case a few years ago. De-dollarization is a serious risk to the US economy while the Chinese yuan is looking to dominate the financial world.