London Daily

Focus on the big picture.
Monday, Sep 15, 2025

China’s cut of US dollar weighting in key index will boost global fortunes of yuan, economists say

China’s cut of US dollar weighting in key index will boost global fortunes of yuan, economists say

China has cut the US dollar weighting in a key yuan exchange rate index for only the second time since 2015. The change will help reduce China’s reliance on the American currency and promote greater international use of the yuan in financial transactions

China’s decision to cut the weighting of the US dollar in a basket of foreign currencies used to determine the strength of the yuan will help Beijing’s long-term efforts to weaken the international dominance of the American currency, economists said.

The China Foreign Exchange Trade System (CFETS), a unit of the Chinese central bank, trimmed the weighting of the US dollar on Wednesday to 21.59 per cent from 22.40 per cent in a key yuan exchange index to make it “more representative” of current trade conditions.

The new version of the index will be based on 2018 trade data, rather than data from 2015, when the CFETS was first established.

The move, which comes amid heightened trade tensions between China and the United States, will help Beijing’s long-term efforts to create an alternative international payments system, economists said.

“The yuan hopes to become a reserve currency, to prevent the situation where the US dollar dominates the global financial system – or the so-called hegemony of the US dollar. This is a longer-term goal … and an inevitable trend,” said Shen Jianguan, vice-president and chief economist at JD Digits, although he added that the adjustment also reflected changes to China’s trading environment.

His remarks were echoed by Lu Zhengwei, chief economist at China Industrial Bank, who said the cut would give the yuan marginally more independence against the US dollar.

“The yuan should live its own way – now there is too much shadow from other [currencies] hanging over it,” he said.

The US dollar still has the heaviest weighting in the CFETS index, while the value of the euro has been expanded to 17.40 per cent from 16.34 per cent. The weighting of the Hong Kong dollar fell to 3.57 per cent from 4.28 per cent.



China still relied heavily on the US dollar and should look to expand the number of foreign currencies that can be directly exchanged with the yuan, Lu said.

Beijing has been locked in a bitter tariff war with Washington for the past 18 months, which has hit bilateral trade and sparked fears about decoupling between the world’s two largest economies.

China’s trade with the US shrank 11.1 per cent in yuan terms in the January-November period, according to Chinese customs data released last month.

The US fell to third place among China’s trading partners in 2019, surpassed by the Asean bloc. China has slipped from America’s top trading partner to its third largest.

However, the US dollar is expected to remain the settlement currency for most of China’s trade.



This week’s change to the yuan index is only the second time the CFETS has made an adjustment to the weighting. In 2017, authorities diluted the weighting of the US dollar by 4 percentage points from 26.40 per cent to 22.40 per cent after nearly doubling the number of currencies in the basket from 13 to 24.

The yuan’s exchange rate fell below 7 to the US dollar in August last year, prompting US President Donald Trump to allege China was deliberately making its currency cheaper to offset the impact of US trade tariffs. The US Treasury Department then followed with an official designation of China as a currency manipulator.

Although China has said depreciation was driven primarily by market forces, Beijing promised to keep the yuan’s exchange rate “basically stable” in relation to a basket of currencies as part of any trade deal with Washington.

“[We will] improve the floating exchange rate system based on the market and adjusted with reference to a basket of currencies, to stabilise the market expectation and maintain the flexibility of the yuan exchange rate,” the People’s Bank of China (PBOC) said in its third quarter monetary policy report.

Newsletter

Related Articles

0:00
0:00
Close
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
Tens of Thousands of Young Chinese Get Up Every Morning and Go to Work Where They Do Nothing
The New Life of Novak Djokovic
The German Owner of Politico Mathias Döpfner Eyes Further U.S. Media Expansion After Axel Springer Restructuring
Suspect Arrested: Utah Man in Custody for Charlie Kirk’s Fatal Shooting
In a politically motivated trial: Bolsonaro Sentenced to 27 Years for Plotting Coup After 2022 Defeat
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
Pig Heads Left Outside Multiple Paris Mosques in Outrage-Inducing Acts
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
On the Anniversary of Queen Elizabeth’s Death: Prince Harry Returns to Britain
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Murdoch Family Finalises $3.3 Billion Succession Pact, Ensuring Eldest Son’s Leadership
×