For more than a decade, China has been trying to reduce its reliance on the dollar, motivated by risks emerging from the U.S. economy—such as the financial crash of 2008—and the desire to boost its own sphere of influence.

But in the last year, a drive to insulate China’s economy from dollar-based sanctions has emerged as possibly the most important incentive for decoupling from the dollar, as China looks to prepare for the possibility of conflict with Taiwan.

Daniel McDowell, associate professor of political science, says that on the question of whether China really wants to internationalize its currency, it has so far not seen China really go all out to internationalize its currency, because the Chinese government believes that the benefits of internationalization still outweigh the risks of financial openness, and Beijing's priority is the stability of financial markets.

"Over the last 15 years or so, we've seen some policies aimed at promoting its international use, but we've also seen a lot of policies that make it less attractive." McDowell, author of "Bucking the Buck: US Financial Sanctions and the International Backlash Against the Dollar” (Oxford University Press, 2023), tells VOA.

McDowell was also quoted in The Guardian article, "China’s war chest: how Beijing is using its currency to insulate against future sanctions."

“To date, international use of the RMB as a payment currency has primarily involved China on one end of the deal,” McDowell says. “To do business with Russia, foreign partners do not really have alternatives—they will have to consider using less traditional payment currencies, like RMB and rubles.”