China's Strategic Shift: Balancing Trade and Boosting Yuan Globalization

China's economic strategy is undergoing a profound transformation, driven by a dual focus on expanding its influence in the Global South and accelerating the internationalization of the yuan. By leveraging infrastructure investments under the Belt and Road Initiative (BRI) and policy reforms to facilitate yuan-denominated transactions, Beijing is reshaping global trade dynamics while challenging the dominance of the U.S. dollar. This strategic shift is not just about economic growth-it's about geopolitical power and financial sovereignty.

Infrastructure as a Catalyst for Yuan Globalization

China's investments in Global South infrastructure have surged in recent years, with the BRI serving as the primary vehicle. In 2025 alone, Chinese companies secured $124 billion in contracts with BRI countries, a record high. These projects span ports, railways, and energy facilities, often funded through yuan-denominated loans and equity. For example, Kenya's Standard Gauge Railway, a $3.8 billion project, and Kazakhstan's $12 billion aluminium complex are now partially financed in yuan, reducing recipient countries' exposure to dollar volatility.

The strategic rationale is clear: by denominating infrastructure deals in yuan, China not only promotes its currency but also creates a self-reinforcing cycle of demand. As more Global South nations settle trade in yuan, Chinese banks and financial institutions gain deeper access to international markets. This aligns with Beijing's 15th Five-Year Plan, which emphasizes "prudent and gradual" capital account liberalization to support yuan internationalization.

Policy Reforms Fueling the Yuan's Rise

China's regulatory environment has evolved to support this vision. The updated QFII framework, for instance, streamlines cross-border investments and expands access to yuan-denominated bonds issued by countries like Hungary and Indonesia. Meanwhile, the Cross-Border Interbank Payment System (CIPS) has become a critical infrastructure for yuan transactions, processing over $5.82 trillion in trade settlements in the first 11 months of 2025.

These reforms are part of a broader push to decouple from dollar-centric systems. By 2025, yuan-denominated cross-border transactions accounted for 30% of China's $6.2 trillion in global trade, a figure that has grown steadily amid U.S. sanctions and geopolitical tensions. The yuan's global payments share, though still sixth in SWIFT rankings, has surged to 3.7% in 2023, reflecting its growing role in trade and finance.

Case Studies: From Africa to Latin America

The BRI's footprint in Africa exemplifies China's dual strategy. In 2025, the continent received $39 billion in BRI investments, with 9.7 billion allocated to green energy projects like solar and wind farms. These initiatives, often funded in yuan, align with China's green transition goals and provide recipient nations with affordable energy while boosting yuan usage. Similarly, Central Asia has become a focal point, with Kazakhstan securing $23 billion in investments for metals and mining projects.

In Latin America, the Chancay deep-water port in Peru-operated by COSCO and inaugurated in 2024-highlights China's shift toward high-impact infrastructure. While BRI investments in the region declined to 1.14% of global engagements in 2025, strategic projects like this port underscore China's long-term ambitions to dominate trade corridors. Brazil, though not formally part of the BRI, has attracted Chinese capital in electric-vehicle manufacturing and wind-turbine production, further embedding yuan-based transactions in its economy.

Challenges and Criticisms

Despite its momentum, China's strategy faces hurdles. Environmental and social concerns persist, with the Global Environmental Justice Atlas documenting 430 socio-environmental conflicts linked to BRI projects. Critics also question the sustainability of yuan-denominated debt, though recent studies suggest that commodity-backed loans-such as those for Kenya's railway-have mitigated default risks.

Moreover, the yuan's global adoption remains constrained by China's tightly controlled capital account and the dollar's entrenched role in global markets. However, Beijing's emphasis on "small and beautiful" projects - focused on sustainability and local needs - may address some of these concerns while fostering trust in yuan-based financing.

The Road Ahead

China's strategic shift is a calculated move to balance trade dependencies and financial influence. By 2025, the yuan's share in global trade finance has risen to third place, and its use in BRI projects is expected to grow as Gulf sovereign wealth funds and private-sector players increasingly partner with Chinese firms. This trend is reinforced by regulatory reforms that simplify cross-border investments and expand yuan-denominated bond markets.

For investors, the implications are clear: yuan-denominated assets and infrastructure projects in the Global South represent a high-growth, high-impact opportunity. While risks remain, China's ability to blend economic pragmatism with geopolitical ambition positions the yuan as a key player in the next era of global finance.