By
Tri Bagus Prabowo
Africa-Press – Eritrea. China is working hard to make the Renminbi (RMB) widely used worldwide and lessen the U.S. dollar’s role in global trade. These efforts are having a significant effect on the global financial landscape. China’s growth in the renminbi, primarily through bilateral agreements between Indonesia and China to use local currencies for trade, is a strategic attempt to dethrone the U.S. dollar and make the RMB a key role in the global economy. This change is not just economic; it is also quite geopolitical. It is a threat to the financial system that has been in place since the conclusion of World War II. China’s attempt to promote the renminbi in 2025 shows that it wants to become a significant world power and lessen the United States’ influence on the world stage. The Bretton Woods Agreement in 1944 made the U.S. dollar the world’s reserve currency, which is why it has been the most important currency in commerce for decades. Because the U.S. is so powerful, it can trade deficits without having a significant effect on the economy right away. It uses the dollar’s standing to keep its power in international financial markets. However, in the last ten years, emerging economies have become more unhappy with the dollar’s central role in global trade. Many countries seek other options to protect themselves from U.S. monetary policy and economic sanctions.
China, the world’s second-largest economy and a major player in global commerce, has led efforts to reduce the dollar’s influence in the global financial system. Indonesia and China have agreed to trade in their currencies instead of the U.S. dollar. This is a big step forward in this quest. Indonesia is an important trading partner for China in Southeast Asia, and its commerce has been affected by changes in the dollar’s value for a long time. Both countries want to protect themselves from the dollar’s volatility and lessen the U.S.’s impact on their commerce by using their currencies—Indonesia’s Rupiah (IDR) and China’s Renminbi (RMB)—for transactions. China’s overall economic plan is likewise tied to the emergence of the renminbi. China has worked to get the RMB into important global financial institutions to make it more widely used worldwide. In 2016, the RMB was included in the International Monetary Fund’s Special Drawing Rights (SDR) basket. This was a big step toward making the currency a worldwide reserve asset. This action made China a key player in the global financial system and made other countries think about using the renminbi instead of the U.S. dollar for trade. China’s Belt and Road Initiative (BRI) has helped the strategic push for the internationalization of the Renminbi. The BRI intends to improve commerce and connectivity between China and countries in Asia, Africa, and Europe. Through this program, China has pushed its trading partners to use the RMB in their dealings, especially for infrastructure projects and energy deals. China is establishing a network of economies that increasingly depend on the renminbi as the main currency for trade by promoting it in high-value and long-term projects. This, in turn, makes the renminbi more popular worldwide and makes the dollar less important for international trade.
From a geopolitical point of view, the renminbi’s growth means that the balance of power in the world’s financial system is changing. The U.S. dollar’s supremacy has helped the U.S. economy and has been a significant tool for U.S. geopolitical power. The U.S. has exploited its power over the dollar to punish countries that disagree with its political goals by hurting their economies. Iran, Venezuela, and Russia are some of the countries that have had much trouble with their economies because they are not part of the U.S.-dominated financial system. China’s attempts to promote the renminbi are about competing with other countries’ economies and making the global financial system more balanced. China is showing its economic strength by relying less on the dollar and testing the U.S.’s ability to employ financial penalties as an instrument of foreign policy. Also, the fact that the U.S. dollar is the most important currency in world trade has made the U.S. less vulnerable to outside economic influences. The dollar’s position lets the U.S. keep running trade deficits because other countries are eager to store assets worth dollars. However, as more countries choose to trade in the renminbi and other local currencies, the U.S. may lose some of the economic benefits of having the world’s most important currency. This change could change how the U.S. deals with other countries, especially regarding its monetary policy and its power through organizations like the International Monetary Fund (IMF) and the World Bank.
The emergence of the renminbi is partly a reaction to the fact that more and more people are unhappy with the current global financial system, which relies primarily on the U.S. dollar. Countries that do not like the dollar’s dominance are looking for other options to avoid the dangers of U.S. monetary policy, like inflationary pressures or the fact that the Federal Reserve’s actions are hard to forecast. The agreement between Indonesia and China shows that countries are moving toward using their currencies instead of the dollar. This is a way to protect countries from the consequences of dollar volatility and make global trade more stable and diverse. If additional countries do this, it might change how global trade works, with regional currencies becoming more important in international deals.
Nevertheless, this change will not come without problems. The renminbi has come a long way, but it still has a long way to go before becoming a global currency. Even though it is in the IMF’s SDR basket, the Chinese government still has substantial control over the renminbi. This makes it less appealing in other regions of the world. The fact that the currency is not very liquid in global markets is another reason it has not been widely adopted. China will need to open its financial markets, lower its capital controls, and make its currency policies more transparent so that the renminbi can become a real global currency. Countries like Indonesia can reduce their transaction costs and exposure to exchange rate concerns by using their currencies to trade with China. However, for these kinds of agreements to work, both China and Indonesia must be able to deal with the problems that arise when employing local currencies. For example, the rupiah’s lack of liquidity could make it hard to make significant transactions. Also, as trade worldwide moves away from the U.S. dollar, countries will have to deal with the difficulties of managing exchange rates and lowering the dangers of currency fluctuations.
In short, the ascent of the renminbi and China’s plan to take the U.S. dollar’s place as the world’s most important currency in trade are significant changes in the global financial system. China is making itself a key actor in global trade and finance by encouraging the use of the RMB through agreements with nations like Indonesia and using its economic strength through projects like the Belt and Road Initiative. This change threatens the United States’ economic dominance and significantly affects geopolitics since it could change how countries do business with each other. As China pushes for the renminbi to be used more internationally, the U.S. dollar’s long-standing dominance in global trade is slowly being challenged. This suggests that the financial future will be more diverse and multipolar.
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