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US-China trade war
EconomyChina Economy

How US dollar doubts, risk of ‘triple whammy’ could give rise to yuan’s renaissance

In the wake of tariff turmoil and Washington’s ‘Big Beautiful Bill’, analysts are questioning safety of US assets while yuan’s resilience turns heads

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China’s yuan has been on a steady upward trajectory – gaining 1 per cent against the US dollar since April 2, when US President Donald Trump announced his unprecedented “Liberation Day” tariffs. Photo: dpa
Sylvia Main Hong KongandJi Siqiin Beijing

As the United States faces renewed concern over unsustainable debts and its deficit outlook, ignited by the “One Big Beautiful Bill Act” and new tariff threats from US President Donald Trump, China’s yuan is being hailed by analysts for its resiliency during the ongoing trade war, with some pointing to a “renaissance of the renminbi”.

Concerns over the sustainability of US debt levels intensified after the US House of Representatives last week passed a sweeping tax and spending bill, which is more than 1,000 pages and contains a range of tax cuts, spending reductions and increases, including a proposal raising the federal debt ceiling by US$4 trillion.

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And Trump’s latest threat of 50 per cent tariffs on the European Union is adding even more uncertainty, according to analysts.
“The most fundamental reason behind the dollar’s decline is the growing doubt over whether US assets remain truly safe,” said Ding Shuang, chief Greater China economist at Standard Chartered, adding that there were many factors at play, including US economic policy, the recent downgrade of its sovereign credit rating and expansive fiscal policy, which would add deficit pressure.

Dan Wang, China director of Eurasia Group, said “the declining appeal of dollar assets is real”.

By comparison, the yuan has been on a steady trajectory – gaining 1 per cent against the US dollar since April 2, when Trump announced his unprecedented “Liberation Day” tariffs. This resilience sharply contrasts with the roughly 13 per cent devaluation that the yuan saw during the onset of the trade war from 2018 to 2020.

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US national debt reached US$36.2 trillion as of Thursday, according to the US Department of the Treasury. It is estimated that debt-interest payments exceeded US$1 trillion in 2024 and are now larger than the defence budget, according to a Citi research note by Mohammed Apabhai. For the current financial year ending in October, debt interest is projected to rise to US$1.2 trillion, it added.

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