Declining Trust in US Dollar Emerges as Major Global Economic Threat
Beijing, Monday, 16 February 2026.
Zhu Min identifies fading dollar confidence as a critical risk, noting its share of global reserves has plummeted to 57 percent amid concerns over US debt levels.
Structural Vulnerabilities and Market Shifts
Writing for China’s International Finance magazine, Zhu—who previously served as a deputy governor of the People’s Bank of China—highlighted that the erosion of the greenback’s credibility is being driven by specific fiscal and geopolitical factors. He pointed to the United States’ significant military spending and escalating government debt as primary catalysts undermining global faith in the currency [1]. Furthermore, sustained high interest rates have compounded these concerns, creating a fragile environment for the world economy in 2026 [1]. Zhu argues that these elements collectively challenge the long-term financial sustainability of the US, prompting a re-evaluation of the dollar’s role as the bedrock of the global financial system [1][2].
Shifting Reserves and Strategic Alternatives
As the dollar’s dominance wanes, a tangible pivot toward diversification is evident in global reserve compositions. Zhu noted that as the dollar’s share of foreign exchange reserves has contracted to 57 percent, the proportions of gold, the euro, and the yuan are simultaneously rising [1]. This trend reflects a broader market consensus that the dollar is losing ground [1]. Amid this shift, Beijing is actively positioning its currency to fill the void; Chinese President Xi Jinping has explicitly stated that the nation must construct a “strong currency” capable of achieving global reserve status and facilitating widespread use in international trade and investment [1].
The Federal Reserve’s Delicate Balance
Looking ahead, the trajectory of US monetary policy remains a critical variable for stabilizing financial markets throughout 2026. Zhu emphasized that interest rate cuts by the US Federal Reserve will be a decisive measure in maintaining stability this year [1][2]. However, the execution of this policy is fraught with risk. Zhu warned that if the pace of interest rate cuts fails to align accurately with the prevailing inflation situation, it will likely generate new uncertainties rather than resolving existing volatilities [1]. Consequently, investors are increasingly turning to alternatives such as gold and emerging markets to diversify away from US dollar assets as the pace of de-dollarisation accelerates [1].