China International Capital Predicts Dollar Dedollarization Trend Continues Despite Q1 Reserve Rebound

CICC-0.18%
According to China International Capital Corporation (CICC), the report released on July 27 predicts that dedollarization remains the long-term trend despite short-term fluctuations in dollar reserves. CICC noted that while the dollar's share of global allocated foreign exchange reserves rebounded to 57.1% in Q1 2026 after falling to 56.4% in 2025, this rebound does not reverse the long-term downward trend. After adjusting for currency exchange rate effects, the global central banks' dollar foreign exchange reserve share has shown only minor fluctuations since Q4 2024, with no reversal of the prior sustained decline. CICC argues that the decline mirrors historical precedent, comparing the process to the British pound's gradual loss of reserve currency status beginning in 1899, which took roughly 30 years to spread from a few countries to many. The research indicates that U.S. government debt expansion and dollar weaponization are eroding the dollar's safe-asset consensus, while AI productivity gains and stock market strength alone are unlikely to reverse the dedollarization trajectory.
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