China needs U.S. dollars but is building a hedge against Washington’s sanctions

China's banking system remains dependent on access to U.S. dollar markets and the SWIFT payment network, which the U.S. government can restrict as a sanctions tool. In response, Chinese officials have developed the Cross-Border Interbank Payment System (CIPS) as an alternative payment infrastructure that does not rely on U.S.-controlled financial channels. The CIPS system has processed cross-border transactions since its launch in 2015 and continues to expand its user base among participating countries. Chinese banks have also increased transactions using non-dollar currencies, including the yuan and other bilateral trading arrangements.

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