The Central Foreign Exchange Trading System (CFETS), a subsidiary of the People's Bank of China (the central bank), announced substantial adjustments to the weightings of major currencies in the basket used to evaluate the Chinese yuan. This move is a routine annual procedure aimed at aligning the value of the Chinese currency with the dynamics of international trade.
According to the official statement released on Wednesday, starting in January 2026, the weighting of major Western currencies will be significantly reduced. The US dollar and the euro will be devalued, along with the Japanese yen and the Australian dollar. Conversely, the currency basket will see an increase in the shares of Asian trading partners' currencies, such as the Hong Kong dollar, the Thai baht, and the South Korean won, reflecting a shift in China's trade priorities.
Details of the new figures
Detailed data revealed that the US dollar's in the basket will decrease from 18.903% to 18.307% . The euro a slight decline, with its share falling to 17.862% from 17.902% previously. These figures confirm reports circulating in Western economic media outlets and clearly indicate Beijing's strategy of diversifying its currency basket.
Implications of timing and economic context
This decision cannot be viewed in isolation from the global economic context; the adjustment of the yuan basket's weighting (CFETS RMB Index) is primarily based on the volume of trade between China and its partners. The reduced weighting of the dollar and the euro effectively means that the share of the United States and the Eurozone in China's total foreign trade has declined relative to the growth in trade with Southeast Asian countries (ASEAN) and neighboring countries.
Since introducing this currency basket in 2015, China has sought to decouple the yuan from the dollar, preferring to measure its currency's strength against a diversified basket of currencies to ensure greater stability against external fluctuations. This adjustment is a further step toward strengthening the independence of China's monetary policy.
Expected impacts and future of the yuan
This adjustment carries strategic implications that extend beyond mere accounting figures; it reinforces China's ambitions for the internationalization of its currency (RMB). By increasing the weighting of Asian currencies, China is asserting its pivotal role as an economic leader in the region and reducing its national currency's exposure to the fluctuations of the US Federal Reserve's monetary policy.
Internationally, this gradual trend could encourage other countries to diversify their reserves and use alternative currencies to the dollar in trade settlements, particularly given the growth of Asian economic blocs. While the dollar remains the dominant global currency, these small, incremental steps are shaping a more multilateral global financial system in the future.
