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President Macron’s recent state visit to China resulted in rare yuan-denominated deals. Does that mean French support for the internationalization of the renminbi?

In April, French President Emmanuel Macron found himself in hot water after making controversial statements in an explosive interview after a state visit to China.

The French leader warned against becoming “followers of the United States” and reminded Europeans that if not enough is done to strengthen European autonomy, European countries “will become vassals” when tensions between the United States and China escalate.

These comments sent European politicians into damage control, with Polish Prime Minister Mateusz Morawiecki stating that “instead of building strategic autonomy away from the United States, I propose a strategic partnership with the United States.”

However, a largely overlooked comment by Macron may turn out to be the most important. The French leader also suggested that Europe reduce its reliance on the “extraterritoriality of the US dollar,” referring to Washington’s ability to deny countries access to the dollar-dominated global financial system.

This concern dates back to former US President Donald Trump’s decision to end Washington’s involvement in the Iran nuclear deal. That reintroduced a strict sanctions regime that forced European companies to withdraw from Iran or risk sanctions. This unilateral decision provoked strong criticism in Europe for an alleged “weaponization” of the dollar that undermined European sovereignty.

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The agreements concluded around Macron’s state visit to China seem to indicate France’s willingness to address this concern, namely by supporting the use of the Chinese yuan or renminbi in international trade.

For the first time, a deal finalized during the visit between the French shipping giant CMA CGM and China State Shipbuilding Corporation was done in Chinese yuan. It was the largest shipbuilding order placed in China to date, with an order for 16 vessels valued at 21 billion yuan ($3.1 billion).

A week earlier, France’s Total Energies and China National Offshore Oil Corporation concluded the first buy of liquefied natural gas (LNG) in yuan through the Shanghai Oil and Natural Gas Exchange.

“It is clear that French companies are looking for a form of protection against perceived dollar risks, which China takes advantage of to advance its agenda of reducing its own exposure to US financial extraterritoriality,” observed Dr. Mathieu Duchâtel, director of studies international. at the Institut Montaigne, a think tank based in Paris.

By using the yuan instead of the dollar, these transactions eliminate US banks as intermediaries. Amassing the Chinese currency also allows French companies to make purchases in China directly without the United States as an intermediary. This arrangement could eventually radically transform the global role of Chinese banking institutions, as the internationalization of the Chinese currency would push them to the forefront of the international financial system.

These agreements follow a growing trend of countries adopting the yuan for international trade. Last April, Israel added the yuan to its foreign exchange reserves and in August Egypt saying would issue government bonds in yuan. This February, Iraq Announced its intentions to allow trade with China to be settled in yuan, while Brazil completely abandoned the dollar in its trade with China agree with Beijing to trade in each other’s currencies.

During his own visit to China, Brazilian President Luiz Inacio Lula da Silva openly beaten the centrality of the US dollar. “Why should all countries be tied to the dollar to trade?…Who decided that the dollar would be the [world’s] currency?” questioned Lula in a clear reproach to the role of the US dollar. “Today, countries have to chase dollars to export, when they could be exporting in their own currencies,” he continued.

For Paris, however, her stance on the issue is still far from self-evident. “It is too early to tell whether these renminbi-denominated deals indicate broader French support for the internationalization of China’s currency,” Duchâtel warned. “At this stage, there is only anecdotal evidence, but it is a trend worth watching.”

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