Despite being the world’s second-largest economy, China still lacks the global monetary influence one might expect. In the third quarter of 2025, the renminbi accounted for only 1.9% of global official foreign exchange reserves, compared to 57% for the US dollar and 20% for the euro, according to IMF data. Even the Australian dollar had a larger share.
Yet reserve status, often perceived as the pinnacle of monetary prestige, may be a distraction. The true measure of a global currency lies not in the vaults of central banks but in the real-world mechanics of cross-border lending and borrowing. This shift in focus could reshape how we evaluate China’s ambitions for the renminbi (RMB).
Why Reserve Status Isn’t Everything
Many assume a currency needs to be widely held as reserves to be international. But history and data contradict this. The UK during the gold standard, the US until 1980, and even the euro today achieved influence without persistent trade deficits or dominant reserve roles.
The IMF’s Special Drawing Rights (SDR) includes the RMB since 2016, formally granting it reserve status. Yet this is symbolic at best. Central banks often accumulate reserves not because of desirability, but due to necessity — as a buffer against volatile capital flows or to prevent currency appreciation. For example, the People’s Bank of China (PBoC) hoarded dollars in the early 2000s for precisely such reasons.
Cross-Border Lending: The True Test
To gauge a currency’s real global standing, look at where debt is issued and how it’s serviced. As of 2025, the US dollar accounts for half ($23 trillion) of all global cross-border debt and 55% of tradeable debt securities.
By contrast, the RMB remains marginal in these roles. Even China’s trillion-dollar Belt and Road Initiative (BRI) was primarily financed in dollars — with 75% of loans denominated in USD. However, this is beginning to change.
By November 2025, dollar lending by Chinese banks declined to $375 billion, down from $587 billion in 2022. Simultaneously, yuan-denominated loans reached $357 billion — a substantial rise. Moreover, China is offering debt conversion into RMB to distressed BRI borrowers, such as in Kenya and Ethiopia, and allowing royalty payments in RMB by Chinese mining firms in Zambia.
These developments mark early but important moves toward creating a full RMB financial ecosystem: invoicing, borrowing, and repayment.
The Bond Market Barrier
Yet China’s global currency ambitions hit a wall in the bond market. In 2025, out of $9 trillion in global cross-border securities, only $25 billion were issued in China’s onshore RMB markets by foreign entities. Offshore RMB issuance in Hong Kong stood at $125 billion — still small in global terms.
The key challenges?
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Capital controls that restrict inflows and outflows
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A market structure dominated by opaque local government and private sector issuers
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A lack of accounting transparency and liquid secondary markets
In short, the size of China’s debt market ($25 trillion) masks its limited openness. Without reforms in governance and transparency, foreign issuers and investors are unlikely to adopt the RMB en masse.
Liability Currency vs. Reserve Currency
It’s not reserve prestige that makes the dollar dominant — it’s its role as a liability currency. When countries borrow in dollars, they must service and hedge in dollars, increasing its use and liquidity. The Fed’s repeated role as a global lender of last resort, especially during the 2008 and 2020 crises, further entrenches dollar dominance.
If the RMB is to follow suit, the PBoC must be willing and able to support global debt markets, especially during periods of financial stress. This is a challenge not of monetary tools, but of institutional mindset and coordination.
So far, China has managed low inflation and built an enormous banking system. But to truly support an international currency, Beijing must allow its capital markets to mature and embrace deeper financial integration — including limited liberalisation, enhanced transparency, and more reliable legal and accounting frameworks.
The Path Forward
To become a true rival to the dollar, the RMB must:
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Grow its role in global borrowing and lending, not just reserves
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Enable broader bond market participation, onshore and offshore
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Allow the PBoC to act as a backstop in times of stress
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Create regulatory and accounting clarity to build investor trust
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Deepen bilateral RMB settlement agreements, especially with commodity and manufacturing partners
The renminbi’s journey is not just a monetary story — it’s a broader test of China’s willingness to reform its financial system for global integration.