The Chinese currency struggles to establish itself as a global reserve currency

China aims to make the renminbi a major international reserve currency, but this strategy faces persistent structural obstacles. According to NS3.AI analyses, the yuan’s share in global foreign exchange reserves has experienced a significant decline, dropping from 2.83% in 2022 to approximately 1.93% in 2025. This downward trend reveals the limitations of the Chinese currency’s international attractiveness, despite Beijing’s efforts.

Capital Controls: Major Barrier to Internationalization

Restrictions imposed by China on capital movements are the main obstacle to the global adoption of the renminbi. These control mechanisms, implemented to preserve national economic stability, make the currency less convertible and accessible compared to Western counterparts. Institutional investors and central banks primarily seek liquid and convertible assets, criteria that the yuan only partially meets.

To bypass these limitations, Beijing has launched several initiatives: the Cross-Border Interbank Payment System (CIPS) facilitates renminbi transactions across borders, while the digital yuan represents a technological modernization of the currency. However, these efforts have not been enough to reverse the trend toward a less diversified reserve in favor of the renminbi.

The Rise of Alternative Solutions

Faced with these constraints, reserve managers are diversifying their portfolios toward options considered more flexible. Dollar-denominated stablecoins and Bitcoin are emerging as substitute settlement tools. These crypto assets offer distinct advantages: frictionless cross-border liquidity, relative political neutrality, and the ability to operate independently of national regulatory frameworks.

This dynamic marks a turning point: as fiat currencies face convertibility constraints, digital assets are gaining relevance in managing international reserves. The growing preference for these alternatives suggests that the future structure of global reserves could reorganize around assets capable of bypassing systemic limitations, including those imposed by Chinese controls.

Toward Necessary Reforms of the Chinese Currency

The current situation presents China with a dilemma: maintain capital controls for macroeconomic stability or relax these restrictions to enhance the attractiveness of the renminbi. Unless structural reforms are undertaken to increase the convertibility and liquidity of the Chinese currency, its share in global reserves is likely to continue shrinking. Simultaneously, this situation strengthens the position of decentralized assets as viable alternatives in an evolving international system.