Russia’s Plan to Replace the Dollar With China’s Yuan Has Collapsed

For three years, Russia ran one of the biggest money experiments in modern history: dump the US dollar and rebuild its trade around China’s yuan. It worked — until it didn’t. New data from Russia’s own central bank shows the plan has effectively collapsed, and the dollar is still standing.

The yuan’s share of payments for Russian exports has halved this year to just 22%, down from a peak of about 44% in mid-2024, according to figures from the Bank of Russia reported by Bloomberg. Instead of paying in yuan, Russia is now taking its own currency, the ruble, for 69% of its exports to Asian countries.

It is a sharp reversal for a strategy that was once held up as proof that the world could move past the dollar — and a warning for every country thinking of doing the same.

What happened

When the United States and its allies imposed sweeping sanctions on Russia after its full-scale invasion of Ukraine in 2022, Moscow was cut off from dollars and euros. Russia’s answer was to turn east. China, its “no limits” friend, became the obvious partner, and the yuan became the obvious replacement currency.

The shift was astonishingly fast. The yuan grew to account for nearly half of Russia’s foreign trade. It became the most traded currency on Moscow’s domestic foreign-exchange market and overtook the dollar in Russian bank deposits. Banks switched their lending from dollars and euros into yuan, the market for yuan-denominated bonds grew at double-digit rates, and the yuan became one of the main assets held in the central bank’s reserves.

China is now Russia’s largest trading partner, accounting for more than a third of its foreign trade. And for a while, the yuan was not just a Russia-China currency. Until mid-2024, the value of Russian exports priced in yuan was consistently higher than the value of goods actually shipped to China — meaning buyers in other countries were also paying Russia in yuan. At its peak, the yuan ranked fourth in the world’s SWIFT international payments system, behind only the dollar, the euro and the British pound.

Then the reversal came — and it came even faster than the rise.

The sanctions that broke the yuan experiment

The turning point was June 2024, when the United States significantly widened the grounds for imposing secondary sanctions — penalties on foreign banks and companies that do business with Russia, even if they are not American.

The effect was immediate. China’s largest lenders stopped dealing with Russian counterparties completely. Payments were frozen or delayed for months. Transfers were sent back. Russia’s economy, by then heavily dependent on the yuan, suddenly faced a shortage of foreign currency. The Bank of Russia eventually urged domestic lenders to restrain yuan-denominated lending.

“Normal banking payments have shrunk dramatically,” said Alexander Gabuev, director of the Carnegie Russia Eurasia Center.

Alexander Vedyakhin, first deputy chairman of Sberbank, Russia’s largest lender, said that even after Russia and China formally shifted toward trading in their own national currencies, payments are still prone to constant disruptions.

The message from companies that help Russian businesses trade with China is blunt. “In 2026, paying suppliers in China is no longer a routine transaction,” STA SiberiaTransAsia Group, a freight and customs-clearance company, told its clients. Even with a signed contract and a vetted partner, Russian companies face payment delays, returned transfers and extra compliance checks.

The hidden cost: up to 20% just to pay

Unable to settle directly in yuan through banks, Russian businesses have been forced to use intermediaries, third countries and more complex payment routes. That has made transactions slower, more expensive and far less predictable.

The total cost of cross-border payments with China now averages 15% to 20% of the transaction value, including commissions and fees charged by intermediaries, according to data from STT Logistics, a freight transportation provider. In other words, for every $100 a Russian company pays a Chinese supplier, as much as $20 can disappear into the cost of simply moving the money.

Many transactions now go through payment agents rather than banks — a route considered more reliable, but also more expensive. Several channels remain open, but none of them guarantees that a payment will actually go through.

For ordinary Russian businesses, that is not an abstract problem. It means higher prices, longer waits for goods, and constant uncertainty about whether a payment will arrive at all.

What this means for China’s yuan ambitions

Russia’s experience was the biggest real-world test of whether the yuan could become a true global currency — the kind of money that countries use to trade with each other, not just with China.

President Xi Jinping has spoken of turning the yuan into a “powerful currency” for international trade, financial markets and central bank reserves. Russia’s experiment showed both the promise and the limits of that ambition. The yuan rose fast when politics pushed it. But it fell fast too, the moment Washington threatened the banks that handle it.

The yuan’s share of global payments has now fallen back to roughly where it was before the war in Ukraine, slipping to fifth place in the SWIFT rankings, behind the Japanese yen. Chinese officials argue that SWIFT data gives an incomplete picture, because transaction volumes through CIPS, China’s own payments system, have grown. Pan Gongsheng, governor of the People’s Bank of China, said in October that the yuan’s share of global payments would actually reach 6% to 7% once China’s homegrown payment system and other internal bank transactions are included.

But even that does not explain the scale of the retreat. “Impetus for expanding yuan internationalisation from Russia sanctions has petered out,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, who has analysed the dynamics of global yuan use.

Bloomberg Economics estimates that Russia accounted for about 30% of the increase seen since 2021 in the share of China’s trade settled in yuan. In other words, a large part of the yuan’s recent rise as an international currency was really the Russia story — and that story is now going in reverse.

It is worth noting that Chinese officials have been equally clear that they are not trying to turn the yuan into a replacement for the dollar. Beijing keeps tight capital controls to guard the flow of money in and out of China, and those controls are one of the main reasons the yuan cannot easily become a global reserve currency like the dollar.

Why the dollar is still so hard to beat

Russia’s setback underlines a basic fact about the world’s money: the dollar’s dominance is not just about habit. It is about power.

The United States showed it can enforce its political will even against the world’s second-largest economy. When Washington widened secondary sanctions in 2024, Chinese banks — which depend on access to the dollar-based financial system — chose to protect that access rather than keep doing business with Russia. No amount of political friendship between Moscow and Beijing could override that calculation.

That is the lesson other countries will take from Russia’s experience. Many governments have talked about reducing their dependence on the dollar, a trend that has grown as US President Donald Trump’s trade disruptions have pushed countries to look for alternatives. But Russia’s story shows that building an alternative payment system is not enough. If the banks that would run it are afraid of losing access to dollars, the system will not work when it matters most.

The political friendship, however, has not been damaged. The “no limits” partnership that Xi and President Vladimir Putin declared weeks before the 2022 invasion remains intact. The two leaders are due to meet next week at the Asia-Pacific Economic Cooperation summit in Shenzhen, China, where they may also hold an unprecedented three-way meeting with Trump.

What happens next

Russia has not given up on trading without the dollar — it has simply changed how it does it. Taking rubles for 69% of its Asian export revenue is itself a form of de-dollarisation, just not the one Moscow originally planned. But a currency that only works when the other side agrees to accept it is a weaker tool than one the whole world uses.

For China, the question is whether it is willing to open up its financial system further to make the yuan genuinely usable around the world. Its latest five-year plan, stretching to 2030, promises to increase the openness of its capital account to advance the yuan’s internationalisation. But any changes are likely to be modest, because opening up would mean giving up the tight controls Beijing uses to manage its economy.

For the rest of the world, Russia’s failed yuan experiment is a reality check. The dollar’s rivals are real, but replacing it will take far more than political will — it will take a financial system that banks and businesses trust enough to use even when Washington says no. So far, no one has built one.

Frequently asked questions

What is de-dollarisation?

De-dollarisation means reducing the use of the US dollar in international trade and finance. Countries do it by settling trade in their own currencies, holding reserves in other currencies, or building payment systems that do not rely on dollars.

How much did the yuan’s share of Russian exports fall?

The yuan’s share of payments for Russian exports fell to 22% this year, from a peak of about 44% in mid-2024, according to data from the Bank of Russia. That is a drop of about half in roughly two years.

Why did Chinese banks stop dealing with Russia?

The United States widened its secondary sanctions in June 2024, threatening penalties against foreign banks that do business with Russia. China’s largest banks, which need access to the dollar-based global financial system, decided the risk was too great and stopped dealing with Russian counterparties.

How expensive is it now for Russian firms to pay Chinese suppliers?

Cross-border payments between Russia and China now cost an average of 15% to 20% of the transaction value, including commissions and fees charged by intermediaries, according to STT Logistics.

Does this mean the yuan will never rival the dollar?

Not necessarily — but it shows how hard the task is. The yuan’s global use is still limited by China’s tight capital controls, and banks will not use a currency if doing so risks their access to the dollar system. China’s five-year plan to 2030 promises to open its capital account further, but changes are expected to be modest.

Sources

• Bloomberg: https://www.bloomberg.com/news/articles/2026-11-11/russian-push-to-escape-dollar-for-yuan-collapses-under-sanctions
• The Edge Malaysia: https://theedgemalaysia.com/node/825261
• TradingView (Seeking Alpha): https://www.tradingview.com/news/seekingalpha:b71c35257094b:0-russia-retreats-from-china-s-yuan-as-u-s-sanctions-bolster-dollar/
• Meduza, via UA.NEWS: https://ua.news/en/dovkolo-svitu/u-rosiyi-chastka-iuania-v-eksportnikh-rozrakhunkakh-vpala-do-22-meduza

This article is for general information and education only. It is not legal or financial advice.