Last chance currency: Juan becomes a financial rescue wheel for sanctioned

chiny24.com 1 week ago

For years, financial analysts have wondered erstwhile and whether Chinese yuan could challenge the global dominance of the US dollar. However, the long awaited breakthrough did not come due to abrupt change of temper on Wall Street or decisions of global investors, but was born in the heat of geopolitical crises. First, the war in Ukraine, and then the escalation of the conflict in the mediate East involving Iran, unexpectedly transformed the Chinese currency into a financial rescue wheel for states cut off from the western financial system.

CIPS records in the shadow of wars

In the spring of 2026, the Chinese cross-border payments strategy CIPS (Cross-Border Interbank Payment System) recorded an unprecedented increase in activity. In March, during a period of expanding tensions on the Israeli-Iran line, the average regular volume of transactions in the CIPS strategy reached a evidence level of 921 billion yuan (about $135 billion), which represented an almost 50% increase over the erstwhile month. Although it is inactive a fraction compared to the $2.2 trillion that flows through the US CHIPS strategy all day, growth dynamics is impressive.

This increase is closely linked to China's position as the largest buyer of Iranian oil. China buys over 80 percent of its offshore oil exports from Iran. Due to US sanctions, these transactions cannot take place in dollars. As the Atlantic Council points out, payments are increasingly settled in yuan through smaller Chinese banks and networks of intermediaries. These funds go to controlled accounts and service Iran to pay for Chinese contractors or imports of goods from your centre, thus bypassing the radars of the U.S. Treasury Department.

Escape from Washington jurisdiction

However, this phenomenon is not limited to Iran. The events of December 2023 were catalysed by events in December 2023, erstwhile Washington issued an executive regulation authorizing secondary sanctions on abroad banks facilitating trade with Russia. In fear of a complete cut off from the dollar system, financial institutions in the United arabian Emirates, Turkey, and the countries of Central Asia began to massively transfer their accounts to yuan.

For Beijing, this situation is an perfect chance to advance its own financial architecture. The SWIFT system, in which yuan's share continues to oscillate around modest 2.7 percent, ceases to be the only reliable indicator of the internationalization of Chinese currency. According to experts from the Council on abroad Relations, the decline in the share of yuan in SWIFT data may be misleading – it does not mean little usage of currency, but the fact that transactions decision to alternative, little transparent (read: controlled) networks for the West, specified as CIPS. The number of banks straight connected to CIPS has increased by 40 percent since 2024, reaching a level of close to 200 institutions.

Digital future bypassing the dollar

However, China is not limited to conventional clearing systems. In parallel, they are developing the mBridge task – a digital platform based on blockchain technology, combining the central banks of China, Hong Kong, Thailand, the United arabian Emirates and Saudi Arabia. This task has already processed commercial transactions worth over $55 billion, of which 95 percent accounted for in digital yuan (e-yuan). This technology allows you to integrate messages and asset transfer into 1 operation, completely bypassing the SWIFT strategy that the US uses to monitor global financial flows.

The current situation illustrates the paradox of American sanctions policy. With each country cut off from the dollar, there is expanding force to build and usage alternate payment channels. As warned by prof. Daniel McDowell of Syracuse University in 2020, the more frequently the United States uses its dominant financial position as a weapon, the faster they can lose it. If accounts for much of the world's oil and gas trade begin to take place in digital channels invisible to the US Treasury Department, the dollar hegemony may shortly collide with the tough reality of the new, bipolar financial architecture of the world.

Source:

Nikkei Asia (asia.nikkei.com) – ‘yuan payments soar as currency of last hotel for Iran, Russia’
Taipei Times (taipeitimes.com) – "The Iran war is China’s global payments debut"
Atlantic Council (Atlanticcouncil.org) – Inside Tehran’s toll boat
South China Morning Post (scmp.com) – "China's Yuan settlements hit record, and the Iran conflict is looking like a catalyst"
South China Morning Post (scmp.com) – “China’s Yuan may be going global faster than Western data suggestions, analyses say”