Abstract
China’s financial reforms in recent decades have propelled the Chinese currency (CNY) to become the fourth most widely used currency in global payments since 2022, following the US Dollar (USD), Euro (EUR), and British Pound (GBP). In 2016, the CNY achieved international recognition as a global currency by joining the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) basket, ranking third in this category. These developments have intensified discussions about the CNY’s potential to challenge the USD’s dominance as a global reserve currency. This study employs a panel data methodology to assess the CNY’s current status and predict its future trajectory as a reserve currency. It identifies key factors influencing reserve currency shares, such as the positive impacts of economic vitality and international trade, as well as the negative effects of long-term bond yields and total international reserves. Additionally, the study forecasts the future distribution of reserve currency shares among the CNY, USD, Euro (EUR), British Pound (GBP), and Japanese Yen (JPY). The results suggest that by 2035, the global reserve currency system will be characterized by an oligopolistic structure, with the USD maintaining its dominant position, while the CNY and the Euro emerge as secondary contenders, challenging but not displacing the USD. This projection indicates a hierarchical, rather than fully multipolar, global reserve currency system, highlighting the growing role of the CNY while underscoring the enduring supremacy of the USD.