Renminbi internationalization will remain incremental, market-driven and closely linked to the broader evolution of China’s financial system

China’s 2026 two sessions — the annual plenary sessions of its top legislative and political consultative bodies convened in March — delivered a clear policy signal globally: China will continue to pursue steady, market-driven renminbi internationalization as a core part of its financial opening-up. Chinese policymakers will follow a stability-focused and incremental approach. While China has no intention of challenging the existing global currency order, that order itself is evolving.

Each time the renminbi’s international role expands, a familiar question arises: Is China trying to replace the US dollar?

The short answer is no. But the more interesting question is why the renminbi’s global presence has been steadily growing in recent years. Part of the answer lies in China’s own financial and economic development, while another lies in the changing structure of the international financial system itself. Signals emerging from this year’s two sessions suggest that Chinese policymakers are increasingly aware of this broader shift.

For decades, the global monetary system has revolved around a single dominant currency. The US dollar remains the backbone of international finance, accounting for roughly 57 percent of global foreign exchange reserves and the majority of cross-border financial transactions.

This arrangement has delivered efficiency and deep liquidity. But it also creates concentration risks. Recent geopolitical developments have made those risks more visible. Financial sanctions, geopolitical tensions and concerns about the resilience of global payment systems have reminded many countries that the international monetary system is not purely economic — it is also political.

Under such circumstances, diversification becomes a natural response. This is where the renminbi enters the picture.

China has never framed renminbi internationalization as a race to replace the dollar. The processes of expanding the use of the renminbi in trade settlement, deepening domestic financial markets and building the infrastructure needed for cross-border financial activity have largely aimed at facilitating trade settlement and mitigating dollar funding risks, rather than displacing the dollar in global reserve portfolios.

The results of this gradual strategy are becoming more visible. According to the Society for Worldwide Interbank Financial Telecommunication, the renminbi rose to become one of the world’s five most active currencies for international payments in January 2026. Meanwhile, the share of China’s cross-border trade settled in renminbi has increased steadily over the past decade, reaching around 30 percent of total trade settlement in recent years.

These developments reflect simple economic logic. When a country becomes one of the world’s largest trading partners, it is natural for its currency to play a larger role in international transactions. China today is a major trading partner for more than 150 countries and regions, and it has remained one of the biggest contributors to global economic growth for many years. As trade networks expand, the use of the renminbi in trade settlement has also expanded.

Financial markets play an equally important role. China’s bond market has grown rapidly over the past decade, and it is now the second-largest in the world, with outstanding bonds reaching nearly 200 trillion yuan (about $28 trillion). For international investors seeking diversification and relatively stable assets, renminbi-denominated Chinese bonds are becoming increasingly attractive.

At the same time, financial infrastructure supporting cross-border renminbi use continues to improve. China’s Cross-Border Interbank Payment System, launched less than a decade ago, is gradually expanding its network of participating banks across different regions and financial centers.

Policy signals from this year’s two sessions reinforce this direction. The Report on the Work of the Government delivered at the fourth session of the 14th National People’s Congress states that China will expand high-standard opening-up, improve cross-border financial services and steadily promote the international use of the renminbi. These priorities indicate that policymakers see currency internationalization as part of a broader financial reform agenda.

Chinese financial regulators have also stressed the importance of maintaining currency stability while expanding its global use. At a recent policy briefing, officials from the People’s Bank of China noted that the renminbi exchange rate has remained generally stable with two-way flexibility, while China will continue to improve cross-border financial services and deepen financial market opening-up.

Such statements highlight a key principle behind China’s approach: renminbi internationalization should remain market-driven and gradual, rather than the result of abrupt policy shifts.

What may be emerging today is not a dramatic shift from one dominant currency to another, but a gradual diversification of the international monetary system. In such a system, several major currencies could share international roles in trade settlement, financial investment and reserve management.

Such a structure may actually prove more resilient than one overwhelmingly dependent on a single currency. When multiple currencies are available, countries and companies have greater flexibility to manage financial risks and respond to global uncertainty.

In this evolving landscape, the renminbi does not need to replace the dollar to become more influential. It simply needs to become increasingly useful. China’s policymakers appear comfortable with such a gradual trajectory. Rapid financial liberalization could expose the domestic financial system to volatile capital flows. Instead, China’s strategy has been to expand the renminbi’s global role step by step while maintaining financial stability at home.

That cautious approach may prove particularly valuable in today’s uncertain global environment. Since the global financial crisis in 2008, episodes of volatile capital flows, monetary cycles and rising geopolitical tensions have repeatedly tested the resilience of international financial markets.

In such circumstances, stability itself becomes a form of credibility. Ironically, the fragmentation of the global financial system may ultimately accelerate the international use of the renminbi — not because China seeks to overturn the existing monetary order, but because many countries increasingly prefer having more than one option.

The message emerging from the two sessions is therefore one of continuity. China will continue deepening financial reforms, expanding market openness and improving financial infrastructure — all of which support the gradual internationalization of the renminbi. In the long run, such a steady approach may prove more durable than any attempt at rapid currency transformation.

The author is a professor and the director of Research Center for Foreign Reserves at the Central University of Finance and Economics.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.