Honestly, if you listen to the news lately, you’d think the US dollar is about to collapse into a heap of useless paper by next Tuesday. People love a good "end of an empire" story. Especially when it involves China's massive $1.2 trillion trade surplus or the latest BRICS summit where world leaders are basically trying to figure out how to stop using the "Greenback" for everything.
But it's not that simple. Like, at all.
The China vs US dollar rivalry isn't some sudden boxing match with a clear knockout in sight. It’s more like a slow, painful divorce where both sides realize they still need to share the same house because moving out is too expensive. We’re sitting here in early 2026, and the data is... well, it's messy. Just this week, the Chinese Yuan (CNY) hit a 31-month high, sliding under the 7-per-dollar mark to around 6.97.
Does that mean the dollar is losing? Not necessarily. It means the world is shifting into a "multipolar" reality where the dollar isn't the only game in town, but it’s still the biggest house on the block.
The De-Dollarization Hype vs. Reality
You've probably heard the term "de-dollarization" a thousand times. It sounds scary. Basically, it’s the deliberate move by countries like China, Russia, and Brazil to trade in their own currencies instead of the US dollar.
🔗 Read more: Jamaican Dollar to Pound: Why the Rate is Shifting This Year
It is happening. For real. In 2025, China reported that nearly 27% of its total goods trade was settled in Yuan. That’s a huge jump from just a couple of years ago. When China buys oil from Russia or beef from Brazil, they aren't always reaching for dollars anymore. They’re using the "Petroyuan."
But here is the "but" that most headlines ignore: Liquidity. If you have a billion dollars, you can spend it anywhere from London to Lagos instantly. If you have a billion Yuan? You're kinda stuck. Beijing still keeps a tight grip on capital controls. You can't just move Yuan in and out of the country whenever you want. For a currency to truly replace the dollar, it has to be "free." And China’s leadership isn't ready to give up that control over their economy just to win a popularity contest.
Why the Dollar is Like the English Language
Think of the US dollar as the English language of money. Even if you hate the US, you probably speak English to do business with someone in Sweden or Japan. It’s the "network effect."
- Trust: People trust the US legal system (mostly) to protect their property.
- Depth: The US Treasury market is the deepest, most liquid pool of money on Earth.
- Habit: Most global debt is still denominated in dollars.
Even with the $1.2 trillion surplus China just posted for 2025, they still hold hundreds of billions in US Treasuries. Why? Because there’s nowhere else to put that much money safely. Even gold, which has been hitting record highs near $4,000, isn't big enough to hold all the world's wealth.
The 2026 Trade Truce and the Yuan's Rise
The relationship between China vs US dollar took a weird turn recently with the "fragile truce" between President Trump and President Xi. After years of tariff wars, they're meeting more often in 2026 to keep things from blowing up.
Interestingly, China isn't trying to tank the dollar. They actually have a "deflation dilemma." If the Yuan gets too strong, Chinese exports become more expensive, and their factories struggle. They want a "controlled appreciation." They’re aiming for a sweet spot—strong enough to make the Yuan look like a global powerhouse, but weak enough to keep selling cheap EVs and electronics to the rest of the world.
"Currency power is a derivative of national power—and guns count." — David Lubin, Chatham House.
✨ Don't miss: To Whom It May Concern: When to Use It and Why It Kinda Sucks
Lubin's point is blunt but true. The dollar stays on top because the US military and its financial "plumbing" (like the SWIFT system) are still the global standard. China is building its own plumbing, called CIPS (Cross-Border Interbank Payment System), but it’s still a fraction of the size.
What This Means for Your Wallet
If you’re an investor or just someone worried about inflation, the China vs US dollar saga matters because it changes where the "safe" money goes.
- Diversification is the new rule. Central banks are buying gold at record rates. They aren't dumping dollars, but they are adding "insurance."
- The "Connector" Economies. Watch countries like Mexico and Vietnam. They are the "middlemen." China sends parts there, they assemble them, and sell them to the US in dollars. The world isn't "deglobalizing"—it’s just getting re-wired.
- Commodity Shifts. We are seeing more "Petroyuan" deals. If you trade in energy or metals, you can no longer assume the price will always be set in USD.
Actionable Insights for 2026
Don't panic about a "dollar collapse," but don't ignore the shift. The era of the "unipolar" dollar—where the US could sanction anyone and shut down their economy overnight—is ending.
Watch the Yield Spreads: As the Federal Reserve cuts rates and the People's Bank of China (PBoC) tries to manage its housing crisis, the gap between US and Chinese interest rates will dictate where the big money flows.
👉 See also: Who Moved My Cheese Explained: Why This Simple Fable Still Dominates Business Strategy
Keep an eye on BRICS Pay: This year, India is hosting the BRICS summit. While India is much more pro-dollar than China or Russia, any progress on a "multipolar" payment system will put fresh pressure on the USD.
Check your portfolio's "China exposure": Whether it's through emerging market funds or direct tech investments, the Yuan's stability (or lack thereof) will swing your returns more than it did a decade ago.
The dollar isn't dying, but it is finally getting some real competition. It’s a messy, complicated transition, and the winners will be the ones who stop looking for a "collapse" and start looking at the new map.
Next Steps:
- Audit your currency exposure: If you’re heavily weighted in US-only assets, consider a 5-10% tilt toward international or "hard" assets like gold.
- Monitor the 7.00 CNY level: This is the psychological "line in the sand." If the Yuan stays consistently stronger than this, expect more "Made in China" goods to see price hikes in the West.
- Research CIPS adoption: Look for news on which major global banks are joining China's alternative to SWIFT; this is the true "underground" indicator of shifting power.