6 minEconomy
Standard Chartered China CEO: Yuan Won't Challenge Dollar in Reserves
Standard Chartered's China CEO says the yuan will not displace the U.S. dollar as the world's dominant reserve currency, though it may compete with the yen and pound as Beijing pushes renminbi internationalization.
The Chinese yuan will not displace the U.S. dollar as the world's dominant reserve currency anytime soon, according to Jean Lu, the chief executive of Standard Chartered's China operations, who said the renminbi still lacks the deep, open markets needed to challenge the dollar's global role.
«There is no way—at least in my career—for the RMB to challenge the USD,» Lu said Wednesday during a media roundtable in Singapore. But she suggested the yuan could prove a more credible competitor to second-tier reserve currencies, saying, «Compared to the yen or pound, the RMB may have a chance.»
The assessment comes as Beijing intensifies efforts to expand the yuan's role in global finance. China's most recent five-year plan, released in March, calls for broadening the currency's use in international markets through instruments such as Panda bonds, which are renminbi-denominated debt issued in mainland China, and Dim Sum bonds, which are sold in offshore markets.
Lu attributed the yuan's limited overseas traction to «limited liquidity in offshore markets.» Chinese capital controls restrict the free flow of the currency into global markets, and the offshore pool remains small. «We're talking about less than 2 trillion yuan, with almost half of it being in Hong Kong,» she said.
The People's Bank of China, the country's central bank, is leading the internationalization push. This year it designated major institutions, including Deutsche Bank, as offshore clearing banks to streamline European access to the renminbi, and launched new repo facilities to help foreign central banks secure yuan liquidity.
Despite those efforts, the dollar's share of global foreign exchange reserves stood at 57% in the first quarter of 2026, according to the International Monetary Fund, up one percentage point from the previous quarter, largely because of the dollar's mild appreciation against other currencies. The yuan accounted for just 2% of reserves, up from 1.95% in the prior quarter.
Investors and governments have nonetheless begun rethinking the dollar's centrality as U.S. government debt grows and Washington increasingly uses the currency to impose sanctions on countries and companies. That has prompted some diversification into the Swiss franc, the euro, and gold.
In Southeast Asia, one of China's largest trading partners, yuan usage is expanding quickly. Settlement volumes between China and Southeast Asia reached 8.9 trillion yuan, or about $1.3 trillion, in 2025, a 50.7% increase, according to a March report from Standard Chartered. ASEAN firms are also increasingly treating renminbi capital markets as reliable tools for hedging and fundraising. In June, Singapore Airlines made its debut in the offshore yuan market with a 1.5 billion yuan Dim Sum bond.
Geopolitical conflict has given the yuan an additional boost. U.S. sanctions on Russia after its invasion of Ukraine pushed Moscow's trading partners, including China and India, to adopt the yuan as an alternative trading currency. After U.S. strikes on Iran earlier this year, Tehran asked shippers crossing the Strait of Hormuz to pay tolls in yuan.
Trade between Southeast Asia and China is hitting historic highs, helped by infrastructure projects such as the Pinglu Canal, which connects southwestern China to the Beibu Gulf and cuts logistics costs by as much as 30%. «Southeast Asia is not too far from China, and has similar languages, culture and shared heritage,» said Patrick Lee, Standard Chartered's ASEAN and Singapore CEO, at the same roundtable. «With the supply chain shifts and geopolitical changes we're seeing, Chinese companies see ASEAN as an attractive place to invest and build supply chain ecosystems in.»
Yet Southeast Asian manufacturers are struggling with Chinese overcapacity. Thailand saw more than 2,000 factory closures in 2024 amid an influx of cheap Chinese steel and other goods, while Indonesian textile manufacturers have struggled to stay competitive, according to the Asia Society Policy Institute's Shay Wester.
Lee and Lu said China is committed not only to selling goods in Southeast Asia but also to manufacturing there. «China's larger state-owned enterprises and privately-owned enterprises are definitely coming to Southeast Asia to lay down their roots and invest for the long term,» Lee said. «It's also a bet on the ASEAN economies to upskill and upgrade their companies and their systems.»
Lu dismissed claims that China is simply exporting industrial overcapacity. «With the threat of a possible tariff and trade war, everyone is urging China to come to their markets to manufacture there, and help them build up their own industries and train their workers… it's a golden opportunity for both China and ASEAN,» she said.
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