The US dollar’s role as the preeminent global reserve currency has been questioned by more investors and foreign policymakers of late. Led by China and Russia, many emerging market countries are redoubling the effort to avoid pricing and settling their trades in the US dollar. This so-called de-dollarization effort is nothing new, but its proponents appear to be more determined due to geopolitical considerations. This report discusses why circumventing the US dollar is not easily accomplished under the existing international financial framework, and what challenges China would need to overcome to make the renminbi a credible alternative reserve currency.
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