Beijing continues to depend on access to U.S. dollar finance even as it takes steps to blunt Washington’s ability to use that system as a tool of pressure. U.S. jurisdiction over key elements of global dollar clearing gives American authorities leverage over foreign banks, a pressure point that has been used in cases involving Iran and other sanctioned entities.
Dollar dependence and enforcement power
Because much international trade and cross-border finance are settled in dollars and routed through U.S. banks and correspondent relationships, U.S. authorities can exert influence over foreign institutions by threatening to deny them access to the U.S. financial system. That ability translates into leverage over Chinese lenders when U.S. officials determine transactions pose sanctions risks, including those tied to Iran.
Beijing’s response: building alternatives
China has been pursuing alternatives intended to lessen that dependence. One example is the China International Payment System (CIPS), designed to facilitate yuan-denominated cross-border payments and provide an alternative clearing channel. Beijing presents such initiatives as ways to protect its financial system from extraterritorial measures and to support the international use of the renminbi.
A long-term dynamic with geopolitical implications
Analysts note that shifting away from entrenched dollar-based infrastructure is a complex, multiyear undertaking; meanwhile, the dollar-based system continues to underpin much of global finance, preserving U.S. influence. The interplay between Washington’s ability to enforce sanctions and Beijing’s efforts to develop parallel payment mechanisms will be a key feature of broader financial competition and geopolitical tensions going forward.