China pushes for a new global monetary order amid loss of confidence in the dollar

China is preparing to face fierce currency competition as the historic dominance of the US dollar weakens. Growing global mistrust of Washington's economic policy, exacerbated by months of erratic decisions by President Donald Trump in his second term, is reshaping the global monetary landscape.

Against this backdrop, Pan Gongsheng, governor of the People's Bank of China, outlined his clearest vision to date on the future of the international monetary system at the annual Lujiazui Forum in Shanghai. According to Pan, after decades of dollar hegemony, the world is moving towards an environment where ‘multiple sovereign currencies coexist, compete and balance each other’. 

Pan emphasised that excessive dependence on a single currency is a topic of global debate and highlighted that the yuan has gained international weight in recent years. This strategy is part of President Xi Jinping's ambition to position China as a global financial power, backed by a stable currency that will expand its role in international trade, especially at a time of growing tensions with the United States. 

The recent tariffs imposed by Trump have prompted several US companies to seek alternatives to the dollar. According to data from US Bancorp, some exporters have opted to settle transactions directly in yuan to avoid exchange rate volatility and reduce risks arising from the instability of the US currency. 

Meanwhile, European Central Bank President Christine Lagarde urged Europe to take advantage of this situation to strengthen the euro's global position. The loss of confidence in Washington is offering a unique opportunity for other currencies to gain ground in cross-border payments. 

Pan Gongsheng stressed that a more competitive and multipolar global monetary system could strengthen international financial resilience and encourage greater discipline in countries' economic management.

Among the alternatives to reduce the dominance of the dollar, he mentioned the possibility of promoting a neutral global currency, such as the Special Drawing Rights (SDRs) issued by the International Monetary Fund. However, he admitted that there is currently no consensus on promoting it as a regular international currency, as its use remains limited and mainly in crisis situations. 

‘The situation in which a single sovereign currency dominates cross-border payments is gradually changing,’ Pan said, making it clear that China is determined to play a leading role in this new global monetary balance.