China Deepens Sanctions Hedge While Still Reliant on the Dollar

The United States retains significant leverage over China through its control of the global dollar-based financial system, a dynamic especially visible in sanctions enforcement against countries like Iran. In response, Beijing is investing heavily in its own cross-border payment system, CIPS, aiming to build an alternative to dollar dominance in international settlements. Still, Chinese banks continue to rely on dollar liquidity for trade and financing, limiting how quickly they can decouple from the existing system. Experts note that de-dollarization will be a gradual process measured in years rather than months. For investors, this dynamic matters as a signal of long-term risks to the global currency system and the potential growing role of the yuan in cross-border trade.