The Association of Southeast Asian Nations (ASEAN) is rapidly accelerating its move away from reliance on the US dollar, driven by geopolitical uncertainties and erratic US monetary policies. This strategic pivot is increasingly favoring the Chinese renminbi and local currencies, according to experts and recent developments across the region. The shift reflects ASEAN’s broader ambition to enhance financial integration, reduce transaction costs, and strengthen resilience against global currency volatility.
From Cash to QR Codes: A Practical Shift in Currency Use
Malaysian private equity investor Ian Yoong Kah Yin exemplifies the practical changes underway. A former investment banker who frequently travels throughout Southeast Asia and China, Yoong relies on his smartphone e-wallet to pay via QR code in Malaysian ringgit or other local currencies. This approach bypasses the traditional need to convert funds first into US dollars before moving into local currencies, thereby eliminating double currency conversion fees and enhancing payment efficiency.
Yoong highlights that about 100 banks in the ASEAN region now participate in China’s yuan-based Cross-border Interbank Payment System (CIPS), facilitating direct yuan transactions. He describes the reduced role of the US dollar and the rise of the renminbi and ASEAN currencies as “inevitable” given current geopolitical tensions and economic shifts. 
ASEAN’s Strategic Plan Emphasizes Local Currency Settlement
ASEAN leaders have formally committed to this transition through the ASEAN Economic Community Strategic Plan 2026-2030, adopted during the 46th ASEAN Summit in Kuala Lumpur on May 26, 2024. The plan outlines concrete goals to deepen financial integration by liberalizing capital accounts, promoting local currency settlements, and strengthening regional payment connectivity. These measures aim to make cross-border investments more seamless and efficient.
The timing of this plan coincides with a notable weakening of the US dollar. In 2024, the US Dollar Index touched three-year lows amid tensions in Washington and market uncertainty. For example, April 21 saw the index dip after US President Donald Trump publicly criticized Federal Reserve Chair Jerome Powell. Subsequent news in June about Trump potentially nominating Powell’s successor earlier than scheduled further contributed to the dollar’s decline.
Geopolitical Risks Expose Dollar Fragility
Dutch investment bank ING has highlighted how rising geopolitical risks, including escalating Middle East tensions, have underscored the dollar’s recent fragility. Typically, such geopolitical shocks boost demand for the US dollar as a safe haven, but this time, the dollar’s recovery was muted and short-lived.
This unusual response reflects a growing skepticism about the dollar’s dominance and stability. It is within this context that ASEAN countries are exploring alternatives to minimize dependence on the US currency and mitigate the risks of volatility and policy unpredictability.
Growing Local Currency Trade Settlements in ASEAN
According to Nawazish Mirza, finance professor at France’s Excelia Business School, ASEAN’s shift toward de-dollarization is “unmistakable” over the last two years. The share of intra-ASEAN trade settled in local currencies has surged from less than 10% in 2019 to above 25% in 2024.
Although the US dollar still dominates global trade invoicing—accounting for more than 70%—ASEAN’s push to use local currencies and the Chinese renminbi is gaining ground. Mirza points to policies like currency swap agreements, bilateral local currency settlement deals, and digital payment innovations as key enablers making non-dollar transactions more viable and attractive.
However, Mirza cautions that the speed of this transition depends heavily on market confidence, liquidity, and the stability of alternative currencies.
Renminbi’s Rising Role in ASEAN-China Trade
Chinese enterprises are leading the charge in expanding the international use of the renminbi, particularly in ASEAN, says Ying Jian, principal strategist at the Bank of China’s Hong Kong Financial Research Institute. The increasing presence of Chinese companies in Southeast Asia fuels demand for renminbi settlement, trading, and financing.
In 2023, renminbi cross-border receipts and payments for goods trade between ASEAN and China exceeded 2 trillion yuan ($279 billion) for the first time—a nearly 48% increase over the previous year. This volume accounted for more than 30% of total bilateral trade, underscoring the renminbi’s growing prominence.
China supports ASEAN’s local currency settlement initiatives and has signed bilateral currency swap agreements with the central banks of Thailand, Malaysia, Indonesia, and Laos to facilitate this transition.
Digital Payment Innovations: Regional QR Code Systems
The adoption of cross-border QR code payment systems represents a significant leap in ASEAN’s regional integration. Launched initially by Cambodia and Thailand in 2020, these interoperable payment platforms allow seamless transactions in local currencies without converting to US dollars.
Singapore has established payment linkages with Thailand (2021) and piloted one with Indonesia (2022). In November 2022, five Southeast Asian central banks—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—signed a memorandum of understanding to further regional cross-border payment connectivity ahead of the G20 summit in Bali.
Joanne Lin Weiling, senior fellow at the ISEAS-Yusof Ishak Institute, describes the QR interoperable payment system as “the way to go” for promoting regional trade, integration, and resilience against global economic headwinds, including rising protectionism.
Thailand and the Renminbi: A Strategic Economic Link
Thailand has embraced the renminbi’s rising role, given its strategic economic ties with China. Bangkok Bank, the country’s largest lender, is the first Thai bank approved by China’s central bank to participate directly in the CIPS system. This membership enables Bangkok Bank to facilitate renminbi transactions with faster settlement times and lower costs.
Kriengsak Chareonwongsak, president of the Institute of Future Studies for Development in Bangkok, emphasizes that as ASEAN reduces US dollar usage, the renminbi is the leading alternative. The bank’s involvement reflects Thailand’s proactive approach to leveraging China’s financial infrastructure.
Balancing Diversification and Stability
While the benefits of renminbi adoption include reduced foreign exchange costs, greater reserve diversification, and stronger trade links with China, challenges remain. According to Mirza, despite multiple bilateral swap agreements, the renminbi’s operationalization as a primary settlement currency still trails behind the US dollar in scale and acceptance.
For ASEAN, balancing currency diversification with financial stability is paramount. The renminbi’s full internationalization remains gradual, necessitating cautious policy calibration to safeguard economic stability.
Conclusion: ASEAN’s Calculated Path Towards De-dollarization
ASEAN’s accelerating move away from US dollar dominance is shaped by a confluence of geopolitical, economic, and technological factors. Washington’s erratic trade and monetary policies, coupled with the US dollar’s weakening, have pushed ASEAN nations to explore more stable and efficient alternatives.
The region’s commitment to promoting local currency settlements, advancing regional payment connectivity, and adopting digital payment innovations underscores a forward-looking agenda aimed at reducing transaction costs, increasing financial resilience, and boosting economic sovereignty.
While the renminbi emerges as a prominent alternative currency, ASEAN’s transition remains a delicate balancing act—aiming for diversification without jeopardizing financial stability. This gradual but determined shift signals a new chapter in ASEAN’s economic integration and its evolving role in the global financial system.
