September 6, 2026
The deeper contest may not be between the dollar and the yuan at all. It may be between two different ways of recycling the world’s trade surpluses.
History rarely repeats itself neatly.
Empires do not collapse according to a timetable. Reserve currencies do not disappear overnight. Great powers seldom recognize the precise moment when other countries begin viewing them differently.
Sometimes, however, there is an event that strips away an illusion.
For Britain, that event was Suez.
For the United States, the Strait of Hormuz may eventually be remembered in similar terms.
Not because America is suddenly about to cease being the world’s dominant military and financial power. It isn’t. Nor because the Chinese renminbi is about to replace the dollar as the world’s reserve currency. It isn’t.
The parallel is more interesting than that.
Suez demonstrated that Britain’s military ambitions, financial system and international obligations had become larger than the economic power supporting them. The crisis did not create Britain’s decline. It revealed a decline that had already been under way for decades.
Hormuz raises a similarly uncomfortable question.
What happens when the country issuing the world’s principal reserve currency can no longer unquestioningly provide one of the public goods upon which that monetary system was built: secure global commerce?
And what happens if another power is quietly building not a replacement reserve currency in the traditional sense, but an alternative architecture in which countries can trade in its currency without necessarily having to accumulate its bonds?
That second question may ultimately prove more important than the first.
What Suez Actually Changed
When Egyptian President Gamal Abdel Nasser nationalised the Suez Canal in July 1956, Britain and France viewed the move as an intolerable challenge.
The canal was not simply another piece of infrastructure.
It was an artery of the British imperial system, connecting Europe with Middle Eastern oil and Asian trade.
Britain, France and Israel eventually launched a military operation against Egypt.
Militarily, Britain remained formidable.
Financially, the picture was very different.
Sterling came under pressure. Britain’s gold and dollar reserves were falling and the Bank of England had to intervene to defend the pound. London increasingly needed American cooperation to obtain sufficient international financial assistance to prevent the currency crisis from becoming much worse.
Washington opposed the invasion.
And Washington possessed leverage.
The Eisenhower administration effectively demonstrated that Britain could no longer conduct independent imperial policy while simultaneously depending on an international financial system increasingly centred on the United States.
Britain retreated.
That was the real humiliation of Suez.
It was not that the Royal Navy had suddenly ceased to exist.
It was that Britain discovered that possessing a navy was no longer the same thing as possessing strategic independence.
A country cannot indefinitely behave like an empire when financing that imperial role depends upon another country.
Suez made this visible.
Sterling Had Already Been Losing the War
There is a convenient version of monetary history in which sterling was the world’s reserve currency until the Suez Crisis and then, almost instantaneously, the dollar replaced it.
That isn’t quite what happened.
The dollar had challenged and, according to some historical reconstructions, overtaken sterling in important central-bank reserve functions decades earlier. Two world wars had devastated Britain’s international balance sheet and dramatically strengthened that of the United States.
By Bretton Woods, the institutional centre of gravity had unmistakably moved across the Atlantic.
But sterling remained enormously important.
Britain still possessed a vast financial network. Foreign governments and companies held sterling balances. London remained one of the centres of international finance.
Suez therefore matters because geopolitical reality suddenly caught up with monetary reality.
Britain was still behaving as though the old system existed.
America demonstrated that it did not.
That is the historical parallel worth keeping in mind when we look at Hormuz today.
The Dollar Was Never Just a Currency
The international dollar system is often described as though it were simply the result of people choosing one currency rather than another.
It is much more than that.
The United States built an entire ecosystem.
It supplied deep and liquid capital markets. Treasury securities became the world’s principal reserve asset and collateral pool. American banks financed trade. Dollar markets provided hedging instruments with enormous depth. The Federal Reserve ultimately stood behind a global dollar funding system.
But there was another component that economists sometimes treat almost as an afterthought.
The U.S. Navy.
The postwar monetary system developed alongside an American security system that kept the world’s major commercial sea lanes open.
The dollar made international commerce financially convenient.
American military power made international commerce physically possible.
Each reinforced the other.
That is why the Strait of Hormuz is more important than merely the price of a barrel of oil.
Before the current conflict, roughly one-fifth of global petroleum consumption and a similarly important proportion of global LNG trade moved through the Strait.
It is one of the great chokepoints of industrial civilisation.
And yet Iran has demonstrated that overwhelming American conventional superiority does not necessarily mean Washington can guarantee ordinary commercial navigation through it.
Iran Does Not Need to Own Hormuz
It would be an exaggeration to say that Iran possesses uncontested control of the Strait.
It clearly does not.
The United States retains overwhelming conventional naval and air power. It can destroy ships, missiles, radar installations and military infrastructure on a scale Iran cannot match.
But that is not quite the relevant question.
The relevant question is whether commercial shipping can move through the Strait normally and economically.
And here Iran has demonstrated something strategically important.
It possesses a denial capability.
A tanker does not need to believe that Iran can defeat the U.S. Navy.
The tanker owner merely needs to believe there is a meaningful probability that his $100 million vessel might be damaged, his cargo destroyed, his crew endangered or his insurance invalidated.
That is enough.
Commercial shipping is not a naval battle.
It is a calculation of risk and return.
The remarkable feature of the present crisis has therefore been the extent to which Iran has been able to influence commercial passage despite America’s vastly superior military capability.
Iran has even selectively authorised particular Iraqi tankers to transit.
That is symbolically important.
A relatively small regional power under immense American military pressure has nevertheless acquired something resembling a veto over ordinary commercial use of one of the most important sea lanes on Earth.
It does not have to permanently close Hormuz.
It merely has to demonstrate that Washington cannot reliably guarantee passage.
And that changes perceptions.
The Monetary Question Behind Hormuz
This is where the story begins connecting with the dollar.
Reserve currencies ultimately rest on confidence.
Countries accept dollars because virtually everyone else accepts dollars. Companies invoice commodities in dollars because dollar markets provide enormous liquidity. Central banks hold dollars because U.S. Treasury securities provide a massive market in which hundreds of billions can be moved without dramatically changing prices.
The system reinforces itself.
But there is also an implicit geopolitical bargain.
Countries participate in an American-centred monetary system while the United States helps provide an international environment in which those countries can trade.
The bargain has been extraordinarily successful.
What happens if both sides of that bargain begin to weaken simultaneously?
American financial sanctions have made governments increasingly conscious that access to the dollar system is conditional.
And Hormuz demonstrates that American military supremacy does not necessarily guarantee uninterrupted access to global trade routes.
For countries that are neither American allies nor American enemies, this creates an obvious incentive.
Diversify.
Not abandon the dollar.
Diversify away from complete dependence upon it.
The SWIFT Numbers Tell Only Part of the Story
This is where discussions about de-dollarisation often become misleading.
Someone produces the latest SWIFT statistics and the argument apparently ends.
The dollar accounts for roughly half of payment value moving across the SWIFT network. The renminbi represents only a few percent.
Case closed.
Except it isn’t.
SWIFT is enormously important, but SWIFT statistics measure activity occurring across a particular financial messaging network. They do not constitute a census of every international transaction conducted everywhere.
And China has spent years building infrastructure outside that narrow frame.
The most important component is CIPS — the Cross-Border Interbank Payment System.
CIPS is China’s infrastructure for clearing and settling cross-border RMB payments.
It has expanded dramatically.
In August 2026 alone, CIPS processed RMB19.4 trillion of payments. During the first eight months of the year the total reached RMB139.7 trillion.
By the end of August the system had 1,853 participants, while almost 5,300 banking institutions across 192 countries and regions could conduct cross-border business through the CIPS network.
This does not mean RMB139.7 trillion of completely separate transactions should simply be added to SWIFT’s numbers.
Some CIPS participants also use SWIFT messaging. The systems overlap in places and they measure different things.
But the comparison demonstrates why SWIFT market-share figures alone can produce an incomplete picture.
Look instead at China’s own cross-border economy.
During the first half of 2026, RMB accounted for 52.9% of China’s cross-border receipts and payments.
The renminbi has already overtaken the dollar as the principal currency used for transactions into and out of China itself.
The Reserve Bank of Australia estimates that the proportion of Chinese trade settled in RMB has approximately doubled since 2021, reaching around 35%.
Outside transactions involving China, however, RMB usage remains comparatively small.
And that distinction is crucial.
The renminbi does not need to become the world’s currency to alter the world monetary system.
It merely needs to become the natural currency of China’s economic sphere.
China represents more than one-fifth of global trade.
That is a very large sphere.
The Real Problem Is What Happens to the Surplus
But there is a much deeper problem with the conventional petrodollar-versus-petroyuan discussion.
Settlement is only the first half of the transaction.
The more important question is what happens afterwards.
Imagine an oil producer sells China $50 billion worth of crude and buys only $20 billion of Chinese goods.
It now has a $30 billion surplus.
What does it do with the money?
Under the traditional dollar system, this question was relatively easy.
The oil exporter earned dollars and recycled a large part of those dollars into dollar assets.
Frequently that meant U.S. Treasury securities.
This recycling mechanism sits near the heart of the reserve-currency system.
America imports goods and commodities and exports financial claims.
The world’s exporters accumulate dollars.
Those dollars return to American capital markets.
Foreign demand for dollar assets helps finance American deficits and keeps the entire system turning.
This arrangement also solves a fundamental problem.
A reserve-currency issuer must supply the rest of the world with reserve assets.
That generally means supplying liabilities.
The United States has been uniquely willing and able to do so.
China has never looked particularly comfortable with the same model.
Becoming a conventional reserve-currency issuer would eventually require Beijing to tolerate enormous foreign holdings of Chinese financial assets, substantially freer capital movement and potentially persistent external deficits.
That conflicts with several characteristics of China’s economic model.
This is where gold becomes fascinating.
Because perhaps China is trying to solve the surplus-recycling problem differently.
Commodity. Renminbi. Gold.
Suppose Saudi Arabia, Brazil, Russia, Indonesia or another commodity producer increasingly sells commodities to China in renminbi.
The conventional criticism immediately follows:
What is the exporter supposed to do with all those yuan?
Buy Chinese government bonds?
Perhaps.
Buy Chinese equities?
Perhaps.
Purchase Chinese manufactured goods?
Certainly.
But there is another answer.
Buy gold.
China has spent more than a decade constructing the infrastructure necessary to make that increasingly practical.
The Shanghai Gold Exchange International was established in Shanghai’s Free Trade Zone in 2014 specifically to allow international institutions access to China’s precious-metals market.
It provides trading, clearing, settlement, delivery and vaulting.
And critically, it trades physically deliverable gold priced in renminbi.
In June 2025 the architecture moved outside mainland China.
The Shanghai Gold Exchange established its first offshore certified gold vault in Hong Kong, operated by Bank of China (Hong Kong), and launched new RMB-denominated gold contracts.
Those contracts can be settled financially or through physical delivery.
Hong Kong’s government was unusually explicit about what this represented: an expansion of the international footprint of RMB-denominated gold trading.
Hong Kong is now aiming to develop far larger bullion-storage capacity and a centralised gold-clearing infrastructure, with plans pointing toward more than 2,000 tonnes of storage capacity over the coming years.
This is not a gold standard.
China does not guarantee an official conversion rate between the yuan and gold.
The People’s Bank of China is not promising foreign governments that every RMB100 billion can be redeemed against its monetary gold reserves.
That distinction is essential.
What China is creating instead is market convertibility into gold.
A commodity producer paid in renminbi can, subject to market access and the relevant institutional rules, potentially recycle those renminbi into bullion through a Chinese-centred trading infrastructure.
The gold is purchased at the market price.
And increasingly, the gold does not necessarily have to remain inside mainland China.
That is a fundamentally different proposition from asking a foreign central bank to accumulate hundreds of billions of Chinese government bonds.
China May Be Solving the Reserve-Currency Paradox
This could represent one of the most interesting monetary experiments of the modern era.
The traditional reserve-currency model contains a contradiction.
The world wants the reserve issuer’s assets.
Therefore the reserve issuer must produce assets for the world to hold.
Over time that means accumulating liabilities to foreigners.
The United States solved the problem by running deficits and issuing enormous quantities of Treasury securities.
Its external liabilities became everybody else’s reserves.
But those liabilities have consequences.
Foreign demand influences domestic bond yields.
Interest rates affect the currency.
Bond prices affect banks and pension funds.
Government borrowing affects fiscal policy.
And eventually the country providing reserve assets can become spectacularly indebted.
China may have noticed the problem.
Instead of saying:
Sell us commodities, take our currency, and recycle your surplus into our sovereign debt,
the emerging system potentially says:
Sell us commodities, take our currency, and if you don’t want to hold the currency indefinitely, exchange part of the surplus for gold.
That is a very different monetary architecture.
Gold does not require China to issue another liability.
It carries no coupon that Beijing must pay.
It has no maturity.
It creates no foreign claim against future Chinese taxation.
And unlike Chinese government bonds, its price can rise dramatically without automatically forcing China’s domestic interest rates higher.
That last point deserves more attention.
Imagine commodity exporters accumulated trillions of dollars of Chinese government bonds.
Changes in their appetite for those bonds would influence Chinese yields, capital flows and ultimately the renminbi itself.
China would increasingly inherit the same financial feedback loops that accompany reserve-currency status in the United States.
Gold partially sidesteps that problem.
If the demand for gold rises, gold can simply become more expensive.
There is no requirement that Chinese government borrowing increase alongside it.
In that sense, gold could operate as a kind of monetary shock absorber.
The exporter gets a reserve asset.
China gets the commodities.
Neither party necessarily needs dollars.
And Beijing does not have to produce an enormous mountain of debt for foreigners to hold.
Gold Is Not an Accidental Part of the System
China’s behaviour toward gold makes considerably more sense when viewed through this lens.
The People’s Bank of China has been steadily increasing its reported gold reserves.
By June 2026 China had reported twenty consecutive months of gold purchases, taking official holdings to approximately 2,346 tonnes. Over those twenty months the reported increase amounted to roughly 82 tonnes.
At the same time China has developed one of the world’s largest physical gold markets.
The Shanghai Gold Exchange offers physically deliverable contracts.
Foreign institutions have been given access through its International Board.
Hong Kong now provides an offshore delivery point.
Hong Kong itself is constructing a much larger bullion ecosystem.
And Asia more broadly is investing heavily in vaulting, trading and physical gold infrastructure.
None of this proves the existence of some secret Chinese master plan to introduce a gold-backed renminbi.
That interpretation goes too far.
The more interesting possibility requires no conspiracy at all.
China may simply be creating enough infrastructure that gold can perform the function it naturally performs best:
the settlement asset at the end of a chain of trade.
The Petroyuan Is Probably the Wrong Concept
This is why the expression “petroyuan” can actually obscure what is happening.
It encourages us to imagine China copying the American system.
Oil was priced in dollars.
Now oil will be priced in yuan.
Foreign producers held Treasury securities.
Now they will hold Chinese government bonds.
Dollar replaces pound.
Yuan replaces dollar.
That may not be the model at all.
The architecture taking shape could look more like:
Commodity → RMB → goods, investment or gold.
Under this arrangement, the renminbi becomes the transaction currency without necessarily becoming the ultimate savings vehicle.
That role can be divided.
The yuan settles the trade.
Chinese assets absorb some of the surplus.
Chinese goods absorb another portion.
Gold absorbs another.
That is potentially a much more attractive proposition for commodity exporters.
They do not have to make a binary decision between the dollar system and trusting the Chinese bond market with their national savings.
They can use China’s currency because they trade with China, while holding part of the resulting wealth in an asset that is nobody else’s liability.
Gold.
That Is Also Why SWIFT Can Mislead
Seen from this perspective, asking whether the RMB represents 3%, 4% or 5% of SWIFT payments becomes much less interesting.
Those figures still matter.
They demonstrate that the dollar remains overwhelmingly dominant across the global financial system.
But they do not necessarily capture the early stages of a different architecture.
Imagine an Indonesian company sells nickel to China.
The invoice is settled in RMB.
The payment clears through the Chinese financial system.
Part of the proceeds buys Chinese machinery.
Part remains as an RMB bank deposit.
Part is eventually exchanged for physical gold.
How much of that economic relationship appears in a statistic describing currency usage inside SWIFT?
Possibly some.
Possibly much of it.
But certainly not in a way that tells us where the exporter ultimately stored the surplus.
That is the important part.
Payment statistics describe the pipe.
They do not necessarily tell us what happens to the water after it leaves the pipe.
And This Returns Us to Hormuz
Now consider the geopolitical backdrop.
China is the world’s largest importer of crude oil.
Many of the countries supplying that oil sit in precisely the regions most exposed to American sanctions, American naval power and geopolitical instability.
For decades the bargain was straightforward.
Oil moved through sea lanes substantially protected by American military power.
Oil was priced overwhelmingly in dollars.
The resulting surpluses flowed disproportionately back toward dollar assets.
Security, trade and money reinforced one another.
Hormuz threatens that circular relationship.
If the United States can no longer guarantee secure passage through the Gulf while simultaneously retaining the ability to exclude countries from the dollar financial system, exporters have a rational reason to develop alternatives.
China offers them an enormous commodity customer.
CIPS provides expanding RMB payment and settlement infrastructure.
The offshore RMB system provides liquidity.
The Shanghai Gold Exchange provides a physically deliverable gold market.
Hong Kong provides an increasingly important offshore bullion hub.
Viewed individually, these institutions appear technical and disconnected.
Viewed together, they begin to resemble a monetary system.
This Is Not Yet a Chinese Bretton Woods
There are obvious limitations.
China retains capital controls.
Its domestic financial markets are not as open as America’s.
Foreign institutions do not enjoy the same freedom to move enormous quantities of capital into and out of China that they enjoy in U.S. markets.
Chinese government bonds cannot remotely match the depth, liquidity and collateral role of U.S. Treasuries.
Legal and political concerns also limit how much foreign wealth investors are prepared to place inside China.
Gold does not eliminate these constraints.
Nor can every international trade surplus simply be transformed into bullion without affecting the gold price.
At sufficient scale the adjustment mechanism would be obvious.
Gold would rise.
Perhaps substantially.
But that may be precisely the point.
The supply of U.S. Treasury securities can expand almost without limit.
The supply of physical gold cannot.
In the dollar system, growing global reserve demand can produce more American liabilities.
In a gold-linked recycling system, growing reserve demand ultimately produces a higher gold price.
Those are profoundly different adjustment mechanisms.
The Successor to the Dollar May Not Be Another Currency
This leads to what may be the biggest mistake in the entire de-dollarisation debate.
Everyone keeps asking:
What currency replaces the dollar?
Perhaps that is the wrong question.
The post-dollar system—if one gradually emerges—may not have a single replacement.
The dollar may continue dominating global finance.
The renminbi may increasingly settle trade involving China.
The euro may dominate Europe’s economic sphere.
Regional currencies may settle bilateral commerce.
Central-bank swap lines may provide emergency liquidity.
CIPS and other payment networks may coexist with SWIFT.
And gold may increasingly sit underneath the system as the politically neutral reserve asset.
In other words, the world could move from a unipolar monetary system to a networked one.
The dollar would remain enormously important.
It simply would not be required for everything.
That is a much more plausible form of de-dollarisation than a sudden collapse of the dollar.
The Real Suez Parallel
And this finally brings us back to Britain.
Suez did not make sterling worthless.
It did not destroy London as a financial centre.
It did not cause the Royal Navy to disappear.
Britain remained rich, powerful and internationally important.
But something psychological changed.
After Suez, it became much harder to pretend that Britain alone determined the rules of the international system.
The financial foundations were no longer sufficient to support the geopolitical role Britain wanted to play.
That is what makes Hormuz potentially historic.
The United States still possesses advantages Britain in 1956 could barely have imagined.
Its capital markets are without equal.
The dollar remains the dominant reserve currency.
Treasuries remain the principal global safe asset.
The U.S. military is unmatched.
America is not Britain in 1956.
But perhaps the relevant question is not whether America is collapsing.
Perhaps the question is whether the rest of the world is beginning to discover that it can construct pieces of international commerce without America at the centre of every transaction.
A tanker sells oil to China.
Payment arrives in renminbi.
CIPS clears the funds.
Some yuan buy Chinese goods.
Some finance investment.
Some are exchanged for bullion.
The gold sits in an offshore vault.
No dollars were required.
No Treasury securities were purchased.
No American bank necessarily had to intermediate the economic relationship.
One transaction like that means almost nothing.
A thousand mean something.
A million begin to constitute a monetary system.
Suez did not announce the death of the British Empire.
It demonstrated that a transition already under way had become irreversible.
Hormuz may eventually be remembered in the same way.
Not as the day the dollar died.
But as the moment when the world began to understand that international trade no longer necessarily required a dollar at the beginning, a Treasury bond at the end, and an American warship in between.