As global confidence in the US dollar erodes in the wake of Washington’s “Liberation Day” tariffs, economists at the Annual Meeting of the New Champions debated whether China’s yuan could emerge as a credible alternative to challenge the world’s dominant currency.
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US President Donald Trump’s sweeping “reciprocal tariffs” on allies and adversaries alike marked “another step in the process of diminishing the role of the dollar as a global reserve currency,” said Diana Choyleva, senior fellow of Chinese Economy at the Asia Society Policy Institute, at the World Economic Forum event – also known as “Summer Davos”.
The dollar’s status is increasingly under threat due to the reluctance of other countries – especially China – to fully rely on the US currency, as well as the rise of digital currencies, stablecoins and alternative global payment systems, and economic mismanagement in Washington, Choyleva said.
On Thursday, the US Dollar index – which tracks the strength of the greenback’s status against a basket of other major currencies – fell below 97, its lowest point since March 2022.
Amid growing doubts about the dollar, Choyleva said the yuan could offer a more promising alternative compared to the euro.
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“China is actively trying to create a separate financial sphere of influence with the yuan at its centre.”