When China twisted BHP’s arm last month and forced it to settle 30 per cent of its iron ore sales in yuan, it was part of a larger effort to boost the use of its currency in global transactions.

While the tussle with BHP was also motivated by an attempt to negotiate iron ore prices down, China’s insistence on a proportion of BHP’s sales being paid for in yuan was a clear escalation of its ambition of eroding the dominance of the US dollar in global financial and economic activity.

China is looking to strengthen its geopolitical ambitions and weaken the already Trump-weakened status of the US and the dollar in global affairs.Credit: Getty Images

It doesn’t appear that it is trying to end dollar dominance, although that might be a long-term goal, but to insulate its own economy and financial system from that dominance as rapidly as it can. Increasing use of the yuan in international transactions also helps extend and expand its spheres of influence.

At China’s Fourth Plenum meeting of the Communist Party last month, the senior leaders spelled out more clearly than they had previously their plans for the yuan, saying China should “promote the internationalisation” of the currency.

The People’s Bank of China, China’s central bank, then said it would expand the use of the yuan in trade, open up financial markets further and continue to develop the offshore yuan market.

Beijing began trying to increase use of the yuan as an international currency after the global financial crisis in 2008, concerned that money-printing by the US and European central banks was devaluing its foreign exchange reserves.

More recently, the seizure of Russia’s offshore foreign exchange reserves by the West after its invasion of Ukraine was a brutal reminder of the vulnerabilities created by over-exposure to the US dollar.

China has about $US3.3 trillion ($A5.1 trillion) of foreign exchange reserves, of which roughly half are thought to be........

© The Sydney Morning Herald