Washington’s threats of financial sanctions against Chinese individuals who were involved in formulating the Hong Kong national security law and Chinese banks that do business with them, as well as officials and institutions that took part in alleged crimes in Xinjiang, has rung alarm bells in both Hong Kong and Beijing. While the United States is unlikely to use the “nuclear option” of cutting Chinese banks off completely from the global US dollar payments system, at least for now, the reality of the threat lays bare for Beijing that, despite its efforts to reduce reliance on the US dollar in the last decade, China is still subject to the US dollar’s hegemony in international trade and payments. If the US opts for modest punishment for Chinese officials, institutions and banks – as it did in punishing Russia for its annexation of Crimea – the damage to China would be minimal. For instance, Chen Quanguo, the Xinjiang party secretary, may not have any foreign assets that could be seized under the Magnitsky Act sanctions, and many local Chinese banks have little or no international exposure to suffer from sanctions under the Hong Kong Autonomy Act. However, the broader picture is still chilling for Beijing. Despite China’s huge diplomatic and financial efforts to boost the use of yuan in cross-border trade and payments, the results remain modest at best More than 10 years after China’s former central bank governor, Zhou Xiaochuan, posed the idea of dethroning the US dollar in the international monetary system with a “super sovereign currency”, the hoped for “multipolarisation” in the world money system has made little, if any progress, with the US dollar remaining dominant in international payment and settlement. Despite China’s huge diplomatic and financial efforts to boost the use of yuan in cross-border trade and payments, the results remain modest at best. The peak of China’s yuan internationalisation campaign came on October 1, 2016, when the Chinese currency was included in the basket of currencies underlying the Special Drawing Rights (SDR), an accounting unit of the International Monetary Fund, which has little practical use in the real world of trade or investment. It gives the yuan nominal recognition as an “international” currency along with the US dollar, the euro, the British pound, and the Japanese yen. However, as former US Federal Reserve chairman Ben Bernanke noted, the inclusion of the yuan in SDR “confers no meaningful additional powers or privileges on China”. The latest data released by SWIFT, the messaging system used by banks around the world for account transfers, showed that the yuan’s share of international payments was just 1.79 per cent in May, compared to 40.9 per cent for the US dollar. In addition, about three quarters of offshore yuan payments took place in Hong Kong – the real use of the yuan beyond China’s borders would be tiny without Hong Kong. Beijing’s bilateral currency swaps with nearly 40 central banks around the world with a combined credit line of some 3.5 trillion yuan (US$500 billion) did not help a lot in sidestepping the US dollar. While the scale of China’s currency swap deals are now larger than that of the US Federal Reserve, these swap lines are rarely used and, when used, are offering countries with weakening currencies and depleting foreign reserves a potential way to take advantage of China. China’s cross-border interbank payments system (CIPS), which was launched in October 2015, is far from becoming an alternative to the US dollar payment system, the Clearing House Interbank Payments System (CHIPS), as the use of yuan is limited. The fundamental question remains unsolved as how the Chinese currency can be trusted by traders and investors until it is freely convertible into other currencies Some Chinese officials, including China Securities Regulatory Commission vice-chairman Fang Xinghai, are publicly calling for Beijing to take steps to speed up process of yuan internationalisation. However, the fundamental question remains unsolved as how the Chinese currency can be trusted by traders and investors until it is freely convertible into other currencies as capital flow restrictions imposed by Beijing now limit conversions. China’s ambition of undermining the US dollar hegemony is clear, but its process of making the yuan a global currency in the last decade has been slow. The broad financial sanction threats from the US provide a chance for Beijing to review the process of how much still needs to be achieved.