## New Path for RMB Internationalization: How China Promotes De-dollarization Through Exchange Rate Advantages

China is leveraging its position as the world's largest creditor nation to expand the international use of the RMB through a sophisticated financial strategy. The core of this plan is simple—offering overseas borrowing countries financing conditions that are far below US dollar loan rates, enticing them to convert dollar-denominated debt into RMB-denominated debt. Bloomberg pointed out that this strategy has already shown tangible results.

Ethiopia became the latest country to join this initiative this week, agreeing to reprice part of its debt to China (involving $53.8 billion) in RMB. Meanwhile, more countries are beginning to replace dollar financing with China’s inexpensive bonds. Kenya is a typical example—by converting its railway loan from USD to RMB earlier this month, the country reduced its annual debt service costs by $215 million.

**A seemingly win-win deal, but with costs for China**

The cost of this strategy is that China must bear the loss from the interest rate differential. When domestic interest rates in China are much lower than US rates, China’s returns as a creditor decrease accordingly. Michael Pettis, senior fellow at the Carnegie Endowment for International Peace, pointed out this contradiction: "If borrowers pay less interest, creditors earn less."

However, for Beijing, this seemingly unfavorable deal has strategic value. Pettis added, "China gains a higher international status for the RMB in exchange for lower yields." This shift has profound implications for China—it helps integrate the RMB into the international trade system, making it a more common international settlement currency, gradually weakening the financial dominance of the US dollar.

**Early signs in the international bond market**

Bloomberg’s latest data shows that by October this year, a total of 68 billion RMB worth of bonds and loan instruments have been issued by governments, banks, and international organizations, doubling the total for the previous year. This rapid growth indicates that RMB internationalization is accelerating.

An anonymous diplomatic source revealed that this model also applies to financing projects outside Africa. The convenience of settling Chinese goods in RMB has increased, thereby strengthening China’s role in international trade and financing.

**Geopolitical and economic drivers**

From a geopolitical perspective, China’s initiatives aim to counter the escalating confrontation between the two largest economies, China and the US. By promoting RMB internationalization, China is weakening the US dollar’s monopoly as the global reserve currency. At the same time, this strategy also consolidates China’s influence in Africa—especially as the US raises tariffs, Africa has become a key market for Chinese exports.

From an economic standpoint, China’s ongoing deflationary pressures and slowing growth have prompted the Chinese central bank to adopt loose monetary policies. The interest rate differential between China and the US creates arbitrage opportunities for borrowing countries: they can lock in financing costs far below US dollar rates. Additionally, amid uncertainties surrounding Trump’s policies, global investors are actively seeking alternatives to the dollar.

**Building an RMB usage ecosystem**

Ding Shuang, chief economist at Standard Chartered Bank, believes that China is working to establish a comprehensive RMB usage ecosystem: encouraging other countries to use RMB in bilateral trade and invest in RMB-denominated financial products. This systematic approach gradually transforms RMB from an optional currency into a necessary one.

Essentially, China is rewriting the international financial landscape with tangible economic benefits—countries that choose RMB to save on debt costs are objectively participating in the process of diversifying the global financial system.