China sees the yuan vs. dollar rivalry like Pepsi vs. Coke, expert says — ‘never the market leader, but serviceable in a pinch’

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.

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. That’s as many elites rely on offshore dollar holdings as a type of insurance against domestic political persecution.

Since China actually 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 was shut out after it invaded Ukraine in 2022.

A yuan network that’s international enough, even without being dominant, could bypass any dollar-based sanctions the U.S. might impose in the future.

“Placing a respectable second, or even a consequential third, would suffice to break the dollar’s effective monopoly and constrain the United States’ ability to impose financial sanctions unilaterally, while saving China the effort and cost of sustaining currency supremacy,” she said.

“From Beijing’s perspective, the mission is........

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