New Report | Petrodollar to Digital Yuan: China, the Gulf, and the 21st Century Path to De-Dollarization

Thursday January 16, 2025 – The Asia Society Policy Institute’s Center for China Analysis (CCA), in collaboration with Enodo Economics, has published a new report exploring the future of the Petrodollar system, which has underpinned international oil trade and U.S. financial dominance since the 1970s.
Authored by Diana Choyleva, CCA Senior Fellow on the Chinese Economy and Chief Economist at Enodo Economics, the report explores how the Petrodollar system is being reshaped by China’s innovations in alternative payment systems, particularly its digital yuan and the mBridge platform. The report further examines how Saudi Arabia’s Vision 2030 economic transformation might play a pivotal role in reshaping global currency dynamics.
Choyleva writes, “Intertwining forces could accelerate changes to the dollar-based financial system in addition to the geopolitical shifts alone. While complete de-dollarization of the oil trade is highly unlikely over the next five years, expect gradual erosion of the dollar’s use in oil trade settlement and the global recycling of oil revenues.”
Choyleva identifies three possible scenarios as China continues to innovate and challenge dollar pricing with its own settlement mechanisms:
- Managed evolution: Gradual expansion of yuan-based settlements and investments while maintaining the core Petrodollar framework.
- External shock: Sudden changes triggered by geopolitical conflict, technological breakthroughs, or market upheaval. Depending on the nature of the shock, this scenario could lead to either dramatic decline of the Petrodollar system or its reinforcement as nations seek the safety of established dollar markets and the US security umbrella.
- Rapid shift to Asia: A decisive strategic pivot by Saudi Arabia and other Gulf states toward deeper integration with Chinese systems.
To counter the fragmentation of the international monetary system and retain global financial leadership, Choyleva suggests that the United States must adapt by “modernizing dollar-based global infrastructure, strengthening Gulf partnerships, and developing frameworks for managing parallel payment systems,” thereby preserving “fundamental advantages while competing effectively with emerging alternatives.”
Read “Petrodollar to Digital Yuan: China, the Gulf, and the 21st Century Path to De-Dollarization” here. Members of the media interested in contacting Diana Choyleva can reach out to [email protected].