For nearly a decade, China has positioned itself as one of the strongest advocates for reducing global dependence on the US dollar. Chinese officials have promoted yuan-based trade settlements, expanded alternative payment mechanisms, and repeatedly called for a more “multipolar” global monetary system.
But recent analysis by the Council on Foreign Relations (CFR) suggests that China’s actual financial exposure to the dollar may be far larger than official reserve data indicates.
The argument is not that China has failed to diversify parts of its reserves. Rather, researchers argue that Beijing may have shifted substantial foreign currency assets away from its officially reported reserves and into less transparent state-controlled financial institutions—while continuing to operate heavily within the global dollar system.
What the official data shows
China’s foreign exchange reserves are managed primarily by the State Administration of Foreign Exchange (SAFE), a government agency under the People’s Bank of China.
According to estimates compiled by CFR senior fellow Brad Setser and academic research tracking reserve composition trends, the share of US dollar assets within China’s official reserves declined significantly over the past two decades.
Setser notes that the estimated dollar share of China’s official reserves fell from roughly 79 per cent in 2005 to around 55 per cent by 2019. However, these figures are estimates because China does not publicly disclose the currency composition of its reserves in detail.
At the same time, China’s overall official reserves have remained broadly stable at approximately $3.1 trillion to $3.3 trillion since around 2016, according to data from the People’s Bank of China and the International Monetary Fund.
That stability is important because China continued running large trade surpluses and accumulating overseas assets during much of that period.
Where did the additional foreign assets go?
According to Setser’s analysis, a growing share of China’s external assets appears to have shifted outside the country’s officially reported reserve holdings.
These assets are believed to be spread across several state-linked institutions, including:
Chinese state commercial banks
Policy banks such as the China Development Bank and Export-Import Bank of China
Sovereign investment vehicles such as the China Investment Corporation (CIC)
CFR research estimates that Chinese state commercial banks may collectively hold around $1 trillion in foreign assets, much of it dollar-denominated. Meanwhile, China’s major policy banks have become large overseas lenders through infrastructure financing linked to the Belt and Road Initiative.
Importantly, many of these overseas loans have historically been issued in US dollars rather than Chinese yuan.
Researchers studying sovereign debt restructurings involving Chinese lenders — including cases in Zambia, Sri Lanka, Ecuador, and Angola — have documented that much of the lending by Chinese policy banks was dollar-denominated.
The China Investment Corporation, established in 2007 as China’s sovereign wealth fund, also manages hundreds of billions of dollars in overseas investments. According to its annual reports, CIC invests globally across equities, bonds, infrastructure, and alternative assets, much of which remains linked to dollar-based markets.
De-dollarisation versus reserve diversification
Economists caution that reducing the dollar share of official reserves is not necessarily the same as true de-dollarization.
Reserve diversification simply means a country spreads holdings across multiple currencies and asset classes. Genuine de-dollarization would imply materially reducing dependence on the dollar across trade, lending, investment, and financial settlement systems.
On that front, the dollar continues to dominate the global financial architecture. According to the IMF’s COFER database, the US dollar still accounted for nearly 58 per cent of disclosed global foreign exchange reserves as of recent reporting periods. The dollar also remains the dominant currency in international trade invoicing, cross-border debt issuance, and global payment systems.
Even China’s own financial institutions continue to rely extensively on dollar liquidity for international operations.
Why Beijing promotes the de-dollarisation narrative
Analysts say China’s messaging serves both strategic and political purposes.
Promoting yuan internationalisation supports Beijing’s long-term goal of reducing vulnerability to US financial sanctions and enhancing China’s influence in global finance. It also resonates with parts of the Global South seeking alternatives to Western-dominated institutions.
At the same time, economists note that China still faces structural constraints in turning the yuan into a true global reserve rival to the dollar.
These include, capital controls limiting free movement of money, limited convertibility of the yuan, concerns over transparency and rule of law, relatively closed financial markets compared with the United States
As a result, China appears to be pursuing a gradual strategy: increasing the international use of the yuan while still maintaining substantial exposure to dollar assets that provide liquidity, stability, and global acceptance.
The bigger picture
The CFR analysis does not conclude that China is secretly “pro-dollar.” Instead, it argues that the public perception of rapid Chinese disengagement from the dollar may overstate the reality.
While the composition of China’s official reserves has diversified, a significant portion of Chinese state-linked overseas assets still appears connected to the dollar system through banks, lending institutions, and sovereign investment vehicles.
In effect, Beijing may be reducing the visibility of its dollar exposure more than eliminating the exposure itself.
That distinction matters because it highlights a broader reality of the global economy: despite growing geopolitical tensions and increasing discussion around alternative financial systems, the US dollar remains deeply embedded in global trade, lending, reserves, and investment flows.
For now, China may be seeking to reshape the global monetary order, while continuing to operate substantially within it.
First Published:
May 11, 2026, 13:41 IST
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