Due to President Donald Trump’s willingness to upend the global status quo, financial commentators and elite media outlets confidently predict that the status of the United States dollar is under threat as the global reserve currency. They say that China’s yuan may replace the dollar in that privileged position. The same voices insist that international investors and central banks are preparing to dump dollar-denominated assets.
Fortunately, these claims are laughable.
They reflect a profound misunderstanding of why the dollar matters to the global economy and a stunning blindness to the positive structural changes unfolding in the U.S. The dollar’s dominance is not sustained by sentiment or fashion. It rests on deep structural, institutional, and political foundations, systems that China is neither willing nor able to replicate.
A true global reserve currency must do three things. It must serve as a reliable store of value. It must function as an effective medium of exchange across borders. And it must be backed by deep, liquid financial markets where capital can move freely, at scale. The U.S. dollar satisfies all three conditions. The Chinese yuan satisfies none of them.
Despite global hand-wringing over Trump’s policies, central bankers and investors continue to hold dollars because they trust the U.S. legal system. Contracts are enforced. Property rights are protected. Assets can be sold, moved, or repatriated without fear of arbitrary government action. Trump, ultimately, remains tethered by what the law says he can do. Trump is immensely powerful, but the Supreme Court is not his servant. Nor, increasingly, is Congress. None of this is true in China.
In China, capital controls are rigidly enforced. The Chinese Communist Party routinely intervenes in markets. Bank accounts are frozen. Senior executives are arrested. Regulations change without warning. Capital is allocated for political objectives, not economic returns. No serious investor or central banker wants to hold a currency whose value depends on the whims of CCP officials.
The dollar is also backed by the deepest and most liquid financial markets in the world. U.S. Treasury securities provide a vast, transparent, and safe pool of assets capable of absorbing trillions of dollars without distorting prices. When crises hit, from the global financial crisis to the COVID-19 pandemic, global demand for dollars surged. It did not collapse. The Federal Reserve became the world’s lender of last resort because the international system trusts that the U.S. financial system works.
China’s markets, by contrast, are shallow and distorted. Prices do not reflect risk. State-owned institutions are forced to buy assets regardless of value. Losses are socialized. Capital is misallocated. Yes, the yuan is becoming more visible in global trade. But what ultimately determines reserve-currency status is not trade invoicing, it is investment opportunity.
The U.S. economy remains dynamic. Growth is accelerating. Productivity gains are reemerging. Investment opportunities are expanding across technology, energy, and advanced manufacturing. China is moving in the opposite direction. Capital is being destroyed by inefficient state-owned enterprises and by Beijing’s continued support for a bankrupt real estate and banking sector. International investors want growth, not value destruction.
And here is the irony the dollar’s critics ignore: the CCP does not actually want the yuan to become the world’s reserve currency. That status would push the yuan higher, undermining China’s export-dependent growth model. China exports or its economy risks depression. Domestic investment and consumption are moribund. Political stability requires a weak, not strong, currency. Beijing wants a stable yuan, but a cheap one.
Finally, dollar pessimists forget the most important advantage the U.S. retains: an enduring commitment to capitalism and creative destruction. For all the Trump administration’s policy missteps, the president and his advisers remain focused on growth and technological leadership. The U.S. leads the world in artificial intelligence. American firms are pushing ahead in quantum computing, space investment, and biotechnology.
The U.S. remains the center of the global venture capital ecosystem. China’s economic star is dimming. The outlook for the dollar and for the American economy is bright.
James Rogan is a former foreign service officer who worked for 30 years in law and finance. He writes a daily note on finance, economics, and society.