The China Price: Beijing’s Green Path to Ending Dollar Dominance
Foreign Affairs · Zongyuan Zoe Liu ·
Beijing’s green path to ending dollar dominance.
In 1971, as the international monetary system was on the brink of collapse, U.S. Treasury Secretary John Connally told a group of worried European finance ministers that the dollar was “our currency, but your problem.” The dollar had become that system’s official reserve currency in 1944, under the Bretton Woods agreement, making signatories subject to the whims of U.S. monetary policy. Even after Bretton Woods collapsed and many currencies floated freely, the dollar continued to dominate. In the last half century, U.S. currency power has only expanded, as more countries have integrated into the global economy and therefore grown to depend on the dollar. China, reliant on export-driven growth, is foremost among them.
Reckoning with the possibility that Washington could someday make the dollar China’s problem, Beijing is now crafting its own solution. In a January 2024 speech, Chinese leader Xi Jinping made this effort explicit, instructing senior provincial and ministerial officials to accelerate China’s transformation into a “leading financial power.” A strong currency, he specified, was one of the essential foundations of that power. When Qiushi, the Chinese Communist Party’s flagship journal, published the full text of the speech in 2026, the standard Xi had in mind became clearer: for a currency to be considered “strong,” it must be widely used in international trade, investment, and foreign exchange markets and be recognized as a global reserve currency.
Xi’s call is the latest episode in a long history of efforts by major powers to reduce their dependence on the dollar-centered global financial system. In 1965, French Finance Minister Valéry Giscard d’Estaing famously described the disproportionate advantages that dollar dominance confers on the United States as “exorbitant privilege”; the same year, France began aggressively converting a substantial share of its dollar reserves into gold, contributing to the collapse of the Bretton Woods system. In 1999, the Japanese government released a report on how to promote wider international use of the yen. That same year, the launch of the euro gave Europe what would become the world’s second most important international currency, affording it greater monetary autonomy even as the European Central Bank carefully danced around any suggestion that it might challenge the dollar.
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