Can the Yuan Surpass the Dollar with CIPS?

On September 12, the BRICS summit was held in New Delhi, India.

Held under the theme ‘Resilience, Innovation, Cooperation, and Sustainability,’ this was the 18th summit during India’s term as the BRICS chair for 2026.

The adopted ‘New Delhi Declaration’ included the phrase: “Facilitating trade settlement and investment using local currencies among member states.”

Although the word dollar never appeared, a Hong Kong media outlet interpreted this as “BRICS moving toward de-dollarization.”

An official from the Indian Ministry of External Affairs tried to downplay the significance by citing phrases about respecting each country’s priorities, but the discussion itself on enhancing the interoperability of cross-border payments and expanding the use of member currencies or central bank digital currencies (CBDC) was explicitly included in the declaration.

It is also noteworthy that a working group named the ‘BRICS Payment Task Force (BPTF)’ continues to lead these detailed discussions.

From parts 1 through 5, we have explored new quality productive forces, dark factories, AI models, quantum security, and the shadows of the economy.

The final piece of all these stories is, ultimately, the flow of money. The starting point of this episode was that even if you build semiconductors, operate robots, and release AI models for free, true ‘self-reliance’ cannot be achieved unless you change the currency itself in which all those transactions are settled.

CIPS: The Rival to SWIFT

The Cross-Border Interbank Payment System (CIPS) is a cross-border payment network led by the People’s Bank of China.

The People’s Bank of China began developing this system in 2012, driven by the need for dedicated clearing infrastructure as the yuan became the 2nd most used currency in China and the 4th globally for international payments.

Unlike SWIFT, which only transmits messages, CIPS processes both transaction instructions and the actual movement of yuan funds at once.

As of 2026, it has grown to connect about 1,600 participating institutions and over 4,900 financial institutions across more than 180 countries and regions. Because it processes transactions directly without passing through multiple Western correspondent banks, the speed is faster and the costs are lower.

However, it should be noted that CIPS is not a completely independent system. In reality, it relies on SWIFT’s messaging standards for about 80% of its communications and uses the latest ISO 20022 international standard.

It is more of a hybrid structure that bypasses SWIFT in the actual fund transfer stage rather than completely replacing it.

Actual usage has also increased noticeably.

In March, the yuan settlement amount in CIPS trade transactions reached 1.46 trillion yuan (approx. 314 trillion won), triple the amount from March 2021, five years prior. Last month, there was news that the daily settlement amount hit an all-time high of 1.22 trillion yuan (approx. 262 trillion won).

In March, the proportion of yuan settlements in Saudi Arabia’s oil trade rose to 41%, and two major Saudi state-owned banks joined CIPS during the same period.

As demand for yuan settlements increased, this trend was reflected in the exchange rate, with some periods seeing the yuan strengthen against the dollar. (The average year-end exchange rate forecast by 13 investment banks tracked by Reuters was around 6.92 yuan.)

The trend of countries under Western sanctions, such as Russia and Iran, being pushed out of SWIFT and finding CIPS as an alternative has also boosted this growth. In early September, 11 foreign banks, including those from Rwanda, signed new direct participant agreements with CIPS.

Digital Yuan: From Cash to Deposits

Starting in 2026, China upgraded the digital yuan (e-CNY) from ‘digital cash’ to ‘deposit-like currency’ that pays interest. This transition is called ‘Digital Yuan 2.0,’ and it means that digital yuan balances are recorded as liabilities of commercial banks and are subject to reserve management.

The central bank is responsible only for issuance, while commercial banks handle actual account opening and management. The design intent is to coexist with the existing financial system while reducing the risk of financial instability caused by bank deposits shifting en masse to the digital yuan.

As of the end of November 2025, the cumulative transaction volume exceeded 16.7 trillion yuan, and the number of personal wallets surpassed 230 million. This is an increase of over 800% compared to June 2023.

There are two calculations behind this transition.

One is the stagnation in adoption.

As a cash substitute, it was difficult to surpass the already established payment ecosystems of Tencent’s WeChat Pay or Alibaba’s Alipay. Things change when you give it interest and change its nature into an asset that can compete with deposits.

The other is to keep dollar-denominated stablecoins in check. Chinese authorities view stablecoins operating outside national regulatory networks as a threat to monetary sovereignty and intend to use the digital yuan as a countermeasure. One research institute summarized this by saying that the digital currency competition is diverging into different directions: China with a state-controlled CBDC, the U.S. with private stablecoins, and Europe with a privacy-focused digital euro. The three countries have entered the race with different philosophies, and it remains an open question which model will become the standard.

Its expansion in Belt and Road Initiative regions is also worth noting.

The People’s Bank of China is pressuring commercial banks to expand the proportion of digital yuan settlements for overseas trade, especially within Belt and Road regions, and lenders are busily releasing compatible products like e-CNY dedicated loans, letters of credit, and trade bills. However, the response from overseas trading partners is still lukewarm.

An industry insider pointed out that while China’s payment system is optimized for its own domestic banking networks, it remains closed and unfriendly for foreigners and overseas companies to access. The fact that the ultimate goal of the digital yuan is not personal retail payments but the monopoly of business-to-business (B2B) international trade settlements seems unrelated to this assessment.

mBridge: A New Infrastructure for Cross-Border Payments

Digital yuan is the key channel for crossing borders, namely mBridge. This project, which began in 2021 with the participation of central banks from mainland China, Hong Kong, Thailand, the UAE, and Saudi Arabia, is a multilateral CBDC platform that directly exchanges digital currencies issued by participating countries using blockchain technology.

Originally started under the Bank for International Settlements (BIS), it is now considered a project effectively led by China.

In fact, there were reports that the BIS stepped away from the project in 2024, and the participation structure itself has changed significantly over time. Recently, Macau also joined.

Since there is no need to go through the dollar as an intermediary currency, the foreign exchange settlement time is reduced from several days to several seconds. It is predicted that small and medium-sized enterprises burdened by high international settlement costs will be the main users of this platform.

The results are also clear. The proportion of digital yuan in cross-border settlements through mBridge reaches 95.3%.

Although it is called cross-border settlement, the digital yuan has effectively become the core currency of this platform.

The Financial Times reported that the commercialization of mBridge is imminent, expecting fees to be about half of existing international payment networks like SWIFT.

However, a U.S. think tank pointed out that mBridge is more likely to work by gradually eroding dollar dependency starting from specific trade routes and specific uses rather than directly challenging dollar hegemony.

Dim Sum Bonds and Panda Bonds: Attracting Capital with Low Interest Rates

Internationalization of the yuan is progressing not only in payment networks but also in the bond market.

Combined issuance of Dim Sum bonds (yuan-denominated bonds issued outside mainland China) and Panda bonds (yuan-denominated bonds issued in mainland China by foreign companies/governments) exceeded 1 trillion yuan (approx. 200 trillion won) this year for the first time. Dim Sum bonds reached 786.3 billion yuan, and Panda bonds reached 231.6 billion yuan, both already surpassing their previous annual highs.

Dim Sum bonds were first introduced in 2010 when the Chinese government allowed foreign companies to issue yuan-denominated bonds to expand Hong Kong’s financial market; considering that the annual issuance volume was only around $5 billion back then, it is truly a world of difference.

The biggest reason for this surge is the interest rate gap.

China’s 10-year government bond yield is 1.68%, a full 3.10 percentage points lower than the U.S. 10-year yield (4.78%).

With the interest rate gap between the two countries near historic highs, demand has flocked from global companies and governments wanting to borrow money in the relatively cheaper yuan. Following Tencent, Alibaba, and Meituan, Kuaishou entered the Dim Sum bond market for the first time, selling 3.5 billion yuan (approx. $500 million) in 5-year bonds; the funds raised are reportedly intended for AI capacity building and data center expansion.

Hong Kong’s Urban Renewal Authority issued dual-tranche bonds worth 8 billion Hong Kong dollars to fund urban redevelopment, and the Asian Infrastructure Investment Bank (AIIB) also sold 4 billion Hong Kong dollars in bonds, contributing to raising Hong Kong’s global status.

The growth of Panda bonds is also substantial.

This year’s issuance scale reached 203.475 billion yuan (approx. 41.9 trillion won) with 119 deals, already exceeding last year’s total annual issuance (183.56 billion yuan). This is a 71.49% increase compared to the previous year.

Emerging countries like Indonesia are also actively issuing Dim Sum bonds to diversify their funding sources; in their first issuance last October, they raised 6 billion yuan (approx. 1.1 trillion won), with demand reportedly three times the issuance size. The Indonesian Finance Minister announced that, following the President’s instructions, they are pushing for a Panda bond issuance in the second half of this year to diversify funding. This can be read as a signal that countries other than China have begun to accept the yuan bond market as a new option for fundraising.

However, there is also a cautious assessment that the growth of the yuan bond market does not immediately mean that dollar hegemony is being shaken.

It is more accurate to view it as the yuan’s utility as a low-interest borrowing tool increasing. Since actual borrowing costs vary depending on the issuer’s credit rating and maturity, it is not a market one can blindly jump into just by looking at interest rate differences.

Why Was the Stablecoin Project Halted?

There is an interesting twist.

Until early 2025, China seemed to be trying to grow yuan-pegged stablecoins using Hong Kong as a springboard.

Hong Kong implemented stablecoin regulations in August last year, and over 50 companies, including Ant Group (which owns Alipay), applied for licenses. Pan Gongsheng, Governor of the People’s Bank of China, also expressed expectations at the Lujiazui Forum last June by mentioning that stablecoins could facilitate cross-border payments, and former Vice Minister of Finance Zhu Guangyao even argued that the U.S. purpose in encouraging stablecoins is to maintain dollar hegemony, making the development of yuan-pegged stablecoins very important.

But the tide turned in an instant.

In September 2025, the People’s Bank of China and the Cyberspace Administration of China instructed major big tech companies like Ant Group and JD.com to stop pursuing stablecoin projects for the time being.

In February 2026, this policy was formalized through the so-called ‘Silver Hair No. 42’ document. Eight regulatory agencies defined all cryptocurrency activities as illegal financial acts and completely banned the issuance of unauthorized yuan-pegged stablecoins. In particular, this directive did not stop at domestic issuance but targeted ‘domestic entities and overseas entities controlled by them’; because of this, even if a yuan-pegged coin were issued in Singapore or Hong Kong, it could be subject to punishment if a mainland Chinese operator were involved. A yuan stablecoin issued offshore only has meaning if it can be used in places linked to the mainland, and this directive effectively blocked that path itself.

According to insiders, privately issued currency was seen as a challenge to the People’s Bank of China’s digital yuan project.

Former PBoC Governor Zhou Xiaochuan also warned at a private forum last July that the risk of stablecoins being excessively used for asset speculation must be guarded against. The moment a stablecoin made with one’s own currency is put on the blockchain, a path for exchange with the dollar also opens; for China, which uses capital controls as a key policy tool, this path becomes an uncontrollable channel that cannot prevent capital flight.

They opened the door to stablecoins only to close it nine months later, and instead, they put their weight behind the interest-bearing Digital Yuan 2.0. This can be read as a choice to push for the digitalization of the yuan through a single, state-controlled channel rather than free private experimentation.

So, Can the Yuan Surpass the Dollar on the Strength of CIPS?

Collecting the pieces—CIPS, digital yuan, mBridge, Dim Sum bonds, and this BRICS summit—the direction is clear.

From payment networks, digital currencies, and bond markets to multilateral diplomacy, they are widening the channels through which the yuan can be used from all sides.

With ‘building an independently controllable yuan cross-border payment system’ explicitly written into the 15th Five-Year Plan, this is not an improvisation but a long-term national design.

However, whether the yuan can replace the dollar is a different question.

China still uses a managed floating exchange rate system (a system where the government manages the exchange rate to move within a narrow range around a reference rate), and it is consistently pointed out that as long as the yuan is not fully and freely convertible, there are limits to gaining trust as a reserve currency. In fact, a domestic research institute once pointed out that to expand international capital flows, the Chinese government must also proceed with financial reforms that relax excessive exchange rate management and capital controls.

As seen in the case of opening and then closing stablecoins, the tension between the state’s instinct to control and protect monetary sovereignty and the openness required for internationalization remains an unresolved task.

If capital is allowed to flow freely, yuan usage will increase, but the risk of capital flight will also grow; conversely, if strict controls are maintained, stability will be protected, but the speed of internationalization will slow accordingly. Looking at the path China has walked so far, it is closer to having carefully balanced between the two by shifting the scale according to the situation.

For Korea, this trend is not just someone else’s business.

In Korea’s export settlements, the yuan’s share is only 1.3%, while the dollar’s share is 84.2%; in import settlements, the dollar is 79.3% and the yuan is only 3.2%.

Despite high dependence on the Chinese market, the settlement currency is still trapped in a dollar-centric structure.

In a single dollar settlement, SWIFT telegraphic transfer fees, correspondent bank fees, and exchange rate spreads pile up layer by layer, and additional losses occur in the dual exchange process of converting won to dollar and then dollar to yuan. If switching to a CIPS-based yuan direct settlement, this dual exchange spread disappears, and the fee structure is simplified. The speed difference is also significant. SWIFT-based dollar settlements take three to five days to be received, but CIPS-based yuan direct settlements are completed within hours.

Preparing for the transition to CIPS-based yuan direct settlements is expected to be an important task for both Korean companies and policy authorities over the next few years.

What is happening now looks more like a slow erosion—chipping away at dollar dependence starting from specific trade routes and specific uses—rather than a revolution to overthrow the dollar system.

Every piece we have examined in this series—semiconductors, robots, AI, quantum security, and the shadows of the economy—eventually meets in one place on this path of money. Because the new economy created by policy, and the old economy hidden in its shadows, all move on top of this payment network and currency.