Yuan Growth Has Remained Capped as Reserve Currency
International firms should prepare for a multi-currency trade environment as China seeks to expand yuan liquidity.
Updated on Sept. 30, 2026 in Financial Services
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Standard Chartered China CEO Jean Lu stated that the yuan will not replace the U.S. dollar as the primary global reserve currency, though it may compete with the yen and pound. The U.S. dollar held 57% of global reserves in Q1 2026, compared to just 2% for the yuan.
Why it matters
While China continues to promote yuan usage to counter geopolitical sanctions and facilitate trade, structural barriers like capital controls and limited offshore liquidity persist. For businesses, this maintains a bifurcated landscape where the dollar remains the benchmark despite regional shifts toward yuan-denominated settlements.
Global foreign exchange reserves in Q1 2026 were dominated by the U.S. dollar at 57%, while the yuan held a 2% share. Meanwhile, 2025 settlement volumes between China and Southeast Asia reached 8.9 trillion yuan, reflecting ongoing shifts in regional trade finance.
The players
Standard Chartered
A multinational banking group with a major presence in Asian trade finance and emerging markets.
People's Bank of China
The central bank responsible for managing China's monetary policy and international currency expansion.
Singapore Airlines
A major global airline operator that recently tapped offshore yuan debt markets for financing.
The details
China is utilizing mechanisms like Panda and Dim Sum bonds—exemplified by the 1.5 billion yuan bond issued by Singapore Airlines in June 2026—to deepen offshore market liquidity. The People's Bank of China has further supported this by launching new repo facilities and appointing specific clearing banks. Despite these efforts, widespread international adoption faces headwinds from stringent capital controls that restrict the free movement of the currency.
Timeline
2024: Thailand recorded over 2,000 factory closures.
2025: China-Southeast Asia settlement volumes reached 8.9 trillion yuan.
March 2026: China released its latest five-year plan for yuan internationalization.
Q1 2026: The U.S. dollar accounted for 57% of global reserves.
June 2026: Singapore Airlines issued a 1.5 billion yuan Dim Sum bond.
Market Landscape
This activity follows the March 2026 five-year plan, which formalized China's strategy to increase the yuan's global footprint through expanded repo facilities and clearing networks. It highlights the divergence between ambitious state-led expansion goals and the practical reality of reserve currency dominance.
Operators dealing with suppliers in Southeast Asia should prepare for increased requests for yuan-denominated invoicing and settlement. Finance teams should monitor whether increased liquidity in offshore Dim Sum bond markets lowers corporate borrowing costs compared to dollar-denominated debt.
The takeaway
The dollar's role as a reserve currency remains entrenched, yet the growth in regional settlement volumes signals a shift toward a more fragmented currency environment. Business leaders should track the liquidity of offshore clearing banks as an indicator of whether yuan-based trade becomes a viable default for their regional supply chains.
Further reading
For more on the changing landscape of global trade settlements, see the latest reporting in Financial Services.
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