The U.S. dollar still anchors global finance, but the system is evolving at the margins. The Chinese renminbi remains a small reserve currency at just over 2 percent of disclosed global official reserves versus roughly 58 percent for the dollar and around 20 percent for the euro. However, its role in payments and trade finance has expanded, reaching about 3 percent of global payments and roughly 6 percent of global trade finance by late 2024–2025.
Sobir Kurbanov.
Alongside this, the currency mix of cross-border lending is shifting: dollar-denominated bank lending to emerging markets fell by nearly 10 percent between early 2022 and early 2024, while Chinese banks reduced dollar lending and expanded renminbi lending, with the RMB share of their overseas lending rising sharply since 2021.
These changes are most visible in economies deeply embedded in China’s trade and financing networks, where settlement choices, reserve composition, and trade finance are being recalibrated in response to tighter dollar conditions and rising geopolitical risk. Central Asia, which is open, trade-dependent and structurally linked to China, is emerging as an early testing ground for how smaller, trade-dependent economies adapt to a more fragmented international monetary system.
A changing global monetary environment
Central Asia’s financial systems are quietly adjusting to a shifting global order. Across the region, the Chinese yuan is gaining ground in trade settlement, bank lending and official reserves. This trend does not signal the collapse of dollar dominance, but it reflects a gradual recalibration driven by geopolitics, sanctions risk, and the region’s deepening integration with China. Higher U.S. interest rates, tighter dollar liquidity, and the growing use of financial sanctions have increased the political and economic costs of dollar dependence. China has responded by promoting greater use of its currency in trade, lending, and reserves, particularly among countries closely tied to its supply chains and infrastructure networks.
For Central Asian states, these global shifts intersect with practical concerns. China is now the region’s largest trading partner and a leading source of finance. Settling trade in yuan reduces transaction costs, aligns with Chinese supplier preferences, and limits exposure to dollar funding cycles. At the same time, post-2022 sanctions on Russia have heightened compliance risks for banks operating through Western correspondent networks, reinforcing incentives to diversify settlement channels.
Central banks and strategic diversification
Vlad Paddack.
Central Asian central banks have begun to reflect these realities in reserve management. Kazakhstan and Uzbekistan have introduced modest but growing yuan allocations alongside the dollar, euro, and gold. Kyrgyzstan and Tajikistan hold smaller positions, while Turkmenistan’s reserve composition remains opaque but is widely believed to include renminbi assets linked to energy trade with China. Across the region, yuan holdings remain limited in absolute terms, yet the pace of growth is notable given that such exposure was negligible a decade ago.
This shift is cautious rather than ideological. Reserve diversification is framed as risk management in a world where monetary power is less centralized. Central banks are seeking flexibility, not alignment. Still, the inclusion of the yuan reflects an implicit recognition of China’s structural role in regional trade and finance, and of the geopolitical risks embedded in excessive reliance on any single currency system.
Banks, trade, and financial alignment
Commercial banks are at the forefront of yuan adoption. In Kazakhstan and Uzbekistan, lenders now offer yuan-denominated deposits, trade finance, and settlement services in partnership with Chinese banks that maintain local clearing capabilities. In Kyrgyzstan and Tajikistan, yuan use is concentrated in trade finance for imports from China, particularly machinery, vehicles, textiles, and construction materials.
These developments closely track trade patterns. Importers and wholesalers increasingly invoice in yuan, from large industrial buyers to bazaar-based traders re-exporting Chinese goods across the region. Yuan lending remains limited, but supplier-backed financing and short-term trade loans are expanding. Over time, this is tightening the financial link between Central Asian firms and Chinese financial institutions, embedding the renminbi more deeply into regional commerce.
Geopolitical trade-offs and new risks
Greater yuan use brings strategic benefits, but it also introduces new vulnerabilities. The renminbi is only partially convertible, its exchange rate is tightly managed, and Chinese financial markets lack the transparency and depth of U.S. and European counterparts. Currency mismatches, liquidity constraints, and valuation risk pose challenges for banks and reserve managers, including limited convertibility, thinner and less transparent markets than dollar and euro venues, and the added exposure created by a managed exchange rate and more constrained renminbi liquidity. These factors can amplify valuation losses and currency-mismatch risks for both reserve managers and commercial-bank balance sheets.
There are also geopolitical and regulatory implications. It also underscores that renminbi-based payment channels do not remove sanctions or the anti-money laundering and countering the financing of terrorism (AML/CFT)AML/CFT obligations and may, in practice, increase compliance and reputational risk when transactions run through more complex correspondent chains with limited transparency and uneven internal controls. Using yuan channels does not remove exposure to global sanctions regimes or AML obligations, and misperceptions about sanctions insulation can increase compliance risks.
While the shift is driven primarily by trade and banking considerations, as renminbi use deepens, sovereign-adjacent exposures may also accumulate – raising the importance of tracking how RMB-linked financing and guarantees could transmit exchange-rate and refinancing shocks onto public-sector balance sheets. Central Asian regulators face the task of integrating yuan exposure into prudential oversight without weakening financial integrity or inviting reputational damage.
Central Asia in a multipolar currency order
The rise of the yuan in Central Asia reflects neither de-dollarization by decree nor a geopolitical pivot toward Beijing. It represents adaptive behavior in response to a more contested global financial system. As monetary power diffuses and financial fragmentation deepens, Central Asian states are hedging their exposure by broadening currency use while avoiding abrupt realignments.
In this sense, Central Asia offers a clear window into the future of the international monetary order. The dollar remains dominant, but its exclusivity is fading. The yuan is not replacing it, yet it is becoming structurally embedded where trade, finance, and geopolitics converge. How Central Asian governments and banks manage this balance will shape not only their financial stability, but also their strategic autonomy in an increasingly multipolar world.
The authors are Sobir Kurbanov, an international development expert and fellow at Nightingale Int. network and Vlad Paddack, a senior analyst at AKE International and a fellow at Nightingale Int. The Nightingale International company operates internationally, with a focus on Central Asia, as well as operations in the USA and the EU.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of The Astana Times.
