China is persisting in challenging the dominance of the dollar in the global financial system and is striving to strengthen the role of its currency, the renminbi (yuan), by easing restrictions on its circulation and promoting a significant expansion of its domestic market to attract foreign investors.
These were the central themes of the speech delivered by Chinese Premier Li Qiang during the summer meeting of the World Economic Forum (WEF), also known as the “Davos of summer,” held this week in the northern Chinese city of Tianjin.
Although he made no direct reference to the United States or the actions of the Trump administration, Li stated that China “will open its doors even wider to the world” and warned about the “fragmentation” of global supply chains, presenting China as a stabilizing force for the global economy.
He noted that authorities are developing the country “as a mega consumer power, in addition to its solid manufacturing base,” which would bring “vast markets for companies from all countries.”
While acknowledging the existence of multiple trade frictions, he maintained that China “will advance firmly and continue injecting more stability and certainty into the global economy,” while calling on “all parties to avoid the politicization of economic and trade issues.”
“Economic globalization will not be reversed; it will simply take a new direction. We will integrate and connect even more with the global market,” he affirmed. “We are not going, nor should we return to isolated islands.”
One aspect of this closer integration is China’s push for greater use of the renminbi, instead of the US dollar, in its international commercial and financial transactions. Promoting the international use of the Chinese currency has long been an objective of Beijing.
However, as Bloomberg recently noted, “what distinguishes the latest push is the timing: Chinese authorities see the erratic decisions of the US and geopolitical tensions as the most favorable environment in years to promote the yuan.”
Li’s speech came a week after the intervention of China’s central bank governor, Pan Gongsheng, at a major economic forum, where he advocated for a “multipolar” monetary system in which “sovereign currencies coexist and compete with balances and checks.”
His statements came a day after European Central Bank President Christine Lagarde proposed in an opinion article in the Financial Times the prospect of a “global euro moment,” another expression of the push to move away from dollar supremacy.
One of the main obstacles to increasing the international role of the renminbi has been the existence of Chinese controls over capital flows, but measures are being taken to relax them. Although far from turning the Chinese financial system into what is required for the renminbi to function at the level of the dollar or even the euro, these represent significant progress.
Among these measures are the relaxation of capital controls, the expansion of cross-border payment systems, and the development of new financial products capable of attracting foreign investment.
As Bloomberg quoted Lynn Song, UNG Bank’s chief economist for China: “The measures to further integrate China with the global financial system seem to be steps in the right direction, as China wants to ensure that the yuan participates in the conversation about major global currencies.”
But there is still a long way to go, as warned by economists from Morgan Stanley in a recent analysis. “At a fundamental level, expanded international use of the yuan depends on a robust economy and greater progress in capital account convertibility.”
Here, the government faces two problems: stimulating the domestic economy and the fear that if financial controls are relaxed too much, capital flight could destabilize the country.
Nevertheless, there is a palpable shift toward greater use of the renminbi and a move away from the dollar.
China’s Cross-Border Interbank Payment System (CIPS), launched by the central bank a decade ago to facilitate cross-border payments with China outside the dollar framework, continues to expand with the incorporation of more foreign banks and its extension to regions such as the Middle East, Central Asia, Africa, and Singapore.
The CIPS system becomes increasingly attractive in light of the US use of its control over the dominant international payment system, SWIFT, to impose sanctions: the clearest example was the sanctions against Russia at the start of the Ukraine war.
Another source of tension is the US attempt to pressure other countries, through the imposition of tariffs, to reduce their economic ties with China, an issue Li also addressed in his speech.
“Some countries and regions,” he said without directly naming the United States or, to some extent, the European Union, “have interfered in market activity in the name of reducing risks.”
Technology bans are another aspect of the US-led attack on China, and Li emphasized that “China’s innovation is open and open-source.” Highlighting that DeepSeek and Alibaba have made their artificial intelligence language models available to the world, he stated: “We are willing to share indigenous technologies.”
Statements from other participants in the WEF summer meeting highlighted the enormous disruption caused by the Trump administration’s actions, particularly regarding investment decisions.
Speaking on a panel, Victor Lap-lik Chu, CEO of a Hong Kong-based investment firm, said: “If you decided to build an additional plant today, you couldn’t calculate the real value of your investment because you don’t know what the actual price will be in three or four years. There are perceptions that if you invest in certain countries, you will face pressure from other governments.”
Even before Trump’s economic war, global foreign investment was already declining. A UN agency reported that foreign direct investment fell by 11.5 percent in 2024, following a decrease the previous year.
Italy’s Undersecretary for Business and Made in Italy, Valentino Valentini, stated that the trade war increases geopolitical risks. He claimed that the US is using tariffs as “a source of revenue to offset an extremely heavy debt.”
“In a geopolitical situation, that is truly disastrous. A very famous French economist from the last century said: ‘Where goods do not cross borders, armies do.’ In the current situation, we cannot accept that.”
On the other side of the world, the growing US debt—one of the main factors undermining confidence in the dollar and fueling attempts to abandon it—is at the center of the conflict around Trump’s “huge and beautiful budget.”
The Congressional Budget Office has indicated that the version of the bill passed by the House would increase US debt by $2.4 trillion by 2034. The White House Council of Economic Advisers has argued that there would be a reduction in debt thanks to growth stimulated by tax cuts.
Republican opponents of the budget demand deeper cuts in spending on social benefits than those already planned.
Their positions were summarized last week by Wisconsin Republican Senator Ron Johnson: “What concerns us is an acute debt crisis. What we want to avoid is global creditors looking at the United States and saying: you are a credit risk.”