Will the yuan challenge the dollar's dominance?

Saudi Arabia joined the Shanghai Cooperation Organization (SCO), which includes countries from Central Asia, Russia, and China.

Accordingly, the economic war between the world's two largest economies, China and the United States, is expanding.

China aims to make its national currency, the yuan, the world's dominant currency, replacing the US dollar, which currently dominates trade, transfers, and pricing of essential commodities, including oil, gas, and minerals.

To achieve this, China seeks to include as many countries as possible using its currency in trade instead of the dollar. For instance, China's latest efforts in this regard have been with Brazil, Latin America's largest economy.

Furthermore, China recently made a historic deal to import natural gas from the United Arab Emirates using the yuan.

Additionally, the largest energy source, Russia, supports Beijing's efforts to reduce its dependence on the dollar and the euro following Western sanctions imposed on it. Moreover, the Russian gas company Gazprom signed an agreement in 2022 to convert payments for Russian gas supplies to China into yuan and rubles instead of the dollar.

Other countries such as Pakistan, Bangladesh, Kazakhstan, and Laos have recently intensified their negotiations with China to enhance the use of the yuan in commercial transactions.

China's ambitions also target Saudi Arabia, the world's largest oil producer, which declared its openness to trading in currencies other than the dollar earlier this year and is negotiating with China to replace the dollar with the yuan in trade. There are also reports of the possibility of Tehran and Riyadh joining the BRICS group.

So, can the yuan shake the dollar's status?

Some experts support this hypothesis, particularly as Beijing's policy has made the Chinese currency the fifth most active currency in global payments. Furthermore, these experts explain that if emerging economies and Saudi Arabia abandon the dollar in oil trade, the United States will face catastrophic consequences as it already faces inflation and financial crises.

On the other hand, other experts believe that the dollar will remain dominant for a long time because 60% of the world's reserves, deposits, and loans are in dollars. Additionally, the dollar is easily traded due to the globalization of the American markets, unlike the closed Chinese system.